Investment Pitches

Pitch Summary:
CROX – In the case of Croc's, the stock continues to trade at an attractive high-single-digit multiple of earnings. Importantly the company is making significant progress in turning the tide for HeyDude after sales of the brand hit an air pocket due to higher-than-wanted inventories in the wholesale channel last year. Inventory levels have improved, enabling average selling prices to move higher while the new HeyDude distribution center in Las Vegas has also now become operational. Along with an expansion of HeyDude-specific outlet stores, which are very high margin and drive nearly a third of Crocs' brand North American sales, it looks like the Croc's playbook is nearly fully in place. And just last week, the company announced Terence Reilly would return to the company as president of the brand. Bringing Reilly back into the fold seems a very promising move. He deserves a great deal of credit for Croc's resurgence which he described as taking it "from meme to dream" when he was previously with the company as head of marketing from 2013 to 2020. He clearly seems to have a knack for creating buzz around a brand, given his recent success at Stanley where he was CEO after driving sales of the famed "Stanley Cup" up ten-fold to $700M in just four years. It seems prospective marketing success can often be as hard to predict as it is important to a brand's vitality. But here, it looks like Reilly is a proven winner. Might he again be able to create a sensation around a brand like HeyDude, one that has high affinity amongst existing customers yet still low-brand awareness more broadly? Given recent operational improvements, the brand seems well positioned to again focus on playing offense and improved brand performance may be right around the corner.

BSD Analysis:
The manager presents a compelling turnaround thesis for Crocs centered on operational improvements and strategic leadership changes. The HeyDude brand appears to be recovering from inventory challenges, with improved wholesale channel dynamics and higher average selling prices indicating pricing power restoration. The new Las Vegas distribution center and expansion of high-margin outlet stores demonstrate operational scaling capabilities. The return of Terence Reilly as brand president represents a significant catalyst, given his proven track record of transforming Crocs from 2013-2020 and his recent success driving Stanley's revenue from $70M to $700M. The stock trades at an attractive high-single-digit earnings multiple despite these positive developments. The combination of operational improvements, proven marketing leadership, and low valuation creates an asymmetric risk-reward profile. The manager views the brand as well-positioned for offensive growth strategies with potential for significant brand performance improvement.

Pitch Summary:
Alphabet (GOOG), a longtime holding in our Fund, stirred up considerable controversy earlier this year when the company released their proprietary AI tool called Gemini to the public. Suffice it to say, the images generated were historically inaccurate and the extreme political leanings of its creators were not even remotely subtle. On the one hand, we decided to maintain our position and do not expect this event to negatively impact near-term results. On the other hand, we also believe this poses a serious risk to the incredible economic moat surrounding its core search business and early warning signs for the potential erosion of that moat are worth paying close attention to. Alphabet was quick to suspend the use of Gemini and went into full damage control mode after the botched rollout. In an effort to mitigate reputational damage, the company cited poor training models, apologized for its shortcomings, and admitted that they "definitely messed up." Despite the official theoretically plausible explanation, we suspect their artificial intelligence product is working as designed and the outputs generated were exactly as intended, reflecting a specific ideological agenda of Alphabet's employees. Last week, CEO Sundar Pichai, published a blog post titled Building for Our Future AI which outlined some internal operational and structural changes, and more broadly discussed his vision for artificial intelligence. Below are two excerpts from the last paragraph that particularly stood out to us (emphasis added): 1. We have a culture of vibrant, open discussion that enables us to create amazing products and turn great ideas into action. That's important to preserve. But ultimately we are a workplace and our policies and expectations are clear: this is a business, and not a place to act in a way that disrupts coworkers or makes them feel unsafe, to attempt to use the company as a personal platform, or to fight over disruptive issues or debate politics. This is too important a moment as a company for us to be distracted. 2. We have a duty to be an objective and trusted provider of information that serves all of our users globally. When we come to work, our goal is to organize the world's information and make it universally accessible and useful. That supersedes everything else and I expect us to act with a focus that reflects that. The first excerpt clearly addresses Alphabet's severe corporate culture issues. We are encouraged Sundar Pichai recognizes he is responsible for running a business and employees need to be mission-oriented at the office. However, extreme cultural issues are exceptionally difficult to fix. Presumably the organization has layers upon layers of middle management filled with individuals who share the same radical political beliefs. How do you force an overwhelming majority of activists to be more moderate? Disney is dealing with similar internal issues that have already had meaningful negative consequences to business performance. Elon Musk reportedly had to fire approximately 80% of employees after acquiring Twitter, partly due to inefficiencies and because the business was hemorrhaging cash, but also partly due to ideological incompatibilities. The point is, recognizing it is one thing but executing a turnaround is more challenging. The second excerpt addresses the inherent biases programmed into Gemini and perhaps other Alphabet products, including legacy search. We are again encouraged Sundar Pichai envisions the creation of an artificial intelligence solution that strives to provide objective and apolitical information to its end users or, at the very least, maintains the perception of doing so. Again, this is easier said than done, but this blog post gives investors some indication that the management team is aware of potential reputational damage and is focused on preserving the valuable moat the business has spent decades building.

BSD Analysis:
The manager maintains a cautious neutral stance on Alphabet despite the Gemini AI controversy, viewing it as both a near-term non-issue and a long-term moat risk. The fund recognizes Alphabet's dominant search business as having an "incredible economic moat" but expresses concern about potential erosion from AI-related reputational damage. The manager suspects the biased AI outputs were intentional rather than accidental, reflecting deeper corporate culture issues that could threaten business performance. While encouraged by CEO Sundar Pichai's acknowledgment of problems and commitment to objectivity, the manager draws parallels to Disney's similar struggles and Musk's Twitter overhaul, suggesting cultural transformation will be extremely challenging. The analysis reveals skepticism about management's ability to execute a successful turnaround given the entrenched ideological issues within the organization. The fund appears to be holding the position based on the strength of the core search business while monitoring for signs of competitive moat deterioration. The manager's perspective suggests they view AI bias as a potential existential threat to Alphabet's trusted information provider status.

Pitch Summary:
JDE Peet's is the second largest coffee business in the world. Jacobs Douwe Egberts (JDE) combined with Peet's to explore IPO opportunities and ultimately went public in 2020. The company is currently navigating several issues, including the effects of the war on its Russian business, the lingering impact of the pandemic that curtailed out-of-home demand, and having to fight massive inflation in coffee prices. While management has not navigated these challenges as well as we hoped, the controlling shareholder sees it similarly and has ousted the former CEO. While its turnaround remains a work in progress, its stock does appear inexpensive on both a relative and absolute basis at just 12.5x 2024's estimated earnings.

BSD Analysis:
The fund managers present a balanced view of JDE Peet's, acknowledging both the company's strong market position as the world's second-largest coffee business and its current operational challenges. The investment thesis centers on valuation attractiveness, with shares trading at 12.5x 2024 estimated earnings, which appears compelling on both relative and absolute metrics. The company faces multiple headwinds including geopolitical impacts from the Russia-Ukraine war, pandemic-related demand shifts in out-of-home consumption, and significant coffee commodity price inflation. Management execution has been disappointing, prompting the controlling shareholder to replace the CEO, suggesting potential for operational improvements. The managers view this as a turnaround situation with attractive entry valuation, though they acknowledge the recovery timeline remains uncertain. The combination of market-leading scale, reasonable valuation, and new leadership provides a foundation for potential value creation despite near-term challenges.

BSD Analysis:
The manager's BGC Group thesis is executing perfectly with multiple catalysts materializing during Q1 2024. The electronic trading business Fenics delivered strong growth with 20% year-over-year revenue increases, led by exceptional performance in Rates (25% growth) and Credit trading (42.6% growth). The manager believes these segments are just beginning to normalize after a decade of zero interest rates, providing significant runway for continued growth. The long-awaited FMX Futures Exchange received CFTC approval and will launch in summer 2024, directly competing with CME's monopoly business. S&P 600 Small Cap index inclusion triggered 46 million shares of price-agnostic buying, validating the C-Corp conversion strategy. Despite the stock rising 11.5% in Q1 and nearly 50% over the past year, the manager maintains a $10+ fair value target, implying continued upside. The normalized earnings power should become apparent as higher-margin Fenics becomes a larger revenue component in an improving business environment.

Pitch Summary:
In Q1, we initiated a new position in Aercap (AER). We outlined the thesis in our Q4 2023 letter and discussed the thesis on Hustlehub. We will refer you to these resources for the thesis. We've added to the position several times and believe that even though the stock was up 20% in Q1, it has 40% near-term upside as the market continues to underappreciate the duration of the leasing hard market.

BSD Analysis:
The manager initiated a new position in AerCap during Q1 2024, demonstrating conviction by adding to the position multiple times despite the stock's 20% quarterly gain. The investment thesis centers on the aircraft leasing hard market dynamics, which the manager believes the market is underappreciating in terms of duration and sustainability. The manager sees significant near-term upside potential of 40% from current levels, suggesting the market has not fully recognized the favorable supply-demand dynamics in aircraft leasing. The reference to a "leasing hard market" indicates tight aircraft supply and strong pricing power for lessors like AerCap. This appears to be a cyclical recovery play in the aviation sector, with the manager betting on continued strength in lease rates and utilization. The position sizing through multiple additions suggests high conviction in the thesis. The manager's confidence in 40% near-term upside indicates expectations for multiple expansion as fundamentals improve.

Pitch Summary:
After discussing Graftech's (EAF) challenges throughout 2022 and 2023, Groundhog Day came early in 2024, with the stock declining 39% in January. The selloff likely stems from indiscriminate selling by Brookfield Asset Management and shares distributed by BAM due to the fund ending. We were again left wondering what we were doing in this business and stock. However, when things look bleakest, the sun rises. In February, Nilesh Undavia filed a 13D, signaling his intention to nominate himself and others to the board at the upcoming annual meeting. Graftech's business and stock have underperformed our expectations, with CEO changes, a plant closure, and other setbacks. A significant shareholder willing to step up and make his voice heard is welcomed. Though Mr. Undavia's regulatory filings were submitted in a lackadaisical manner, and lacks direct steel industry experience, he has significant skin in the company. His 5.7% stake, acquired with PERSONAL capital, speaks volumes about his commitment to the business and his outlook on the electric arc furnace and graphite electrode industry. Having a board member with substantial ownership is something we're open to, even if his background and filing process were imperfect. We held calls with both parties. One emphasized accountability, while the other offered excuses. As my father used to say, "losers make excuses." Graftech shareholders desperately need someone to hold management accountable. A complacent board requires a shake-up, where management owns only 0.15% (mainly through option grants). Management opposed Mr. Undavia and instead backed incumbents Debra Fine and Anthony Taccone. Arguments against Mr. Undavia included no relevant work experience, a disorganized filing process, and no new business ideas. Mr. Undavia's arguments included Graftech's loss of market share, CEO turnover indicating underlying issues, significant ownership, and willingness as an outsider to hold management accountable. When we met with management months ago, they seemed overconfident, like a wide receiver celebrating a touchdown when the team is down 30. As Sabres fans, we understand the importance of accountability. When asked about the rationale behind firing head coach Don Granato, Dylan Cozens said, "We want to be pushed harder and held to a higher standard." Granato was popular but couldn't lead the team from good to great. Similarly, Graftech's management and board need a new approach. WE RECOMMEND VOTING FOR NILESH UNDAVIA. WITHHOLD DEBRA FINE & ANTHONY TACCONE. We appreciate Mr. Undavia's efforts and capital investment in bringing about change at Graftech. We remain committed shareholders and optimistic the business cycle bottomed early in 2024. We anticipate electrode prices recovering throughout the year, and volumes improving in 2025.

BSD Analysis:
The manager maintains a bullish stance on Graftech despite significant underperformance, viewing the 39% January decline as temporary selling pressure from Brookfield's fund liquidation. The investment thesis centers on activist investor Nilesh Undavia's 5.7% stake and board nomination as a catalyst for management accountability and operational improvements. The manager criticizes current management's 0.15% ownership and complacent board oversight, supporting Undavia's proxy fight despite his lack of steel industry experience. The turnaround thesis relies on cyclical recovery expectations, with electrode prices anticipated to recover throughout 2024 and volumes improving in 2025. The manager views the current business cycle as having bottomed in early 2024, positioning for a multi-year recovery in the electric arc furnace and graphite electrode markets. The activist situation provides both governance improvements and potential operational catalysts. This represents a classic deep value play with activist catalyst overlay in a cyclical materials business.

Pitch Summary:
To summarize our thesis on Cogent briefly, the company's acquisition of Sprint Wireline was transformational to Cogent's long-term value which created an opportunity for a high reward/low risk investment that was among the most compelling skews I've ever encountered. The key points are described below: 1. By repurposing the Sprint fiber network, Cogent can address a whole new end market (Wavelengths) which could become Cogent's largest and most profitable business. 2. The transaction also contributed significant valuable assets which: IPv4 addresses (worth $1.5-2 billion by my estimates), data centers (>$1 billion), dark fiber (>$1 billion), and cash from T-Mobile ($700 million). Our upside case depends on Cogent's efforts in Wavelengths to be reasonably successful, but we can make nice returns even if they are only moderately successful. Our downside case is protected by the robust portfolio of monetizable assets mentioned in the second point above. When we include the value of Cogent's core business, the breakup value of Cogent is significantly greater than the company's enterprise value. However, this is not a sum-of-the-parts thesis. We expect to generate performance from Cogent's future growth and free cash flow generation – not the value of its monetizable assets. When we assess the value of the growth we expect Cogent to generate, it is not hard to pencil out upside scenarios with equity value exceeding $10 billion (>$200 per share). On Cogent's Q4 2023 earnings call, Dave Schaeffer discussed the company's options for creating value from its IPv4 address portfolio: (a) selling some or all of them, (b) continuing to lease them (and raising prices), and/or (c) securitizing lease revenues. With a market value around $50 per address for its large address blocks, Cogent's ~38 million addresses are worth between $1.5-2 billion. Alternatively, it can monetize these assets through securitizations in the ABS market. As of the writing of this letter, the company has just priced its first securitization, raising $206 million of capital in the first-ever IPv4 lease securitization transaction in the market. The securitization is backed by the company's IP leasing business which currently consists of about 12 million lased addresses and generates ~$40 million of run-rate revenue which carries 95% margins. My favorite line from the company's roadshow materials was: 'The greatest cost is the cost of sending the customers their bills.' While we have limited historical disclosures, Schaeffer suggests that the business is growing >3% month-over-month and >40% y/y, and has only 0.8% annual churn. It is a very high-quality revenue stream, especially considering that Cogent's lease prices are about 30-50% below current wholesale market levels and are >90% below the prices AWS and Azure charge customers to lease their IPv4 addresses (Cogent charges $3.60/year vs. Amazon at ~$44 per year). Interestingly, Cogent's IPv4 leasing customers can bring those IP addresses into their AWS environments, providing an attractive arbitrage opportunity that can save cloud computing customers significant money. Recognizing its pricing was too low, Cogent raised prices for new customers by 50% as of March 1st and has seen no impact to its leasing momentum. The combination of healthy new volume growth, higher new lease pricing, and a gradual repricing of the existing customer base should drive significant growth in leasing revenues over the coming years.

BSD Analysis:
The manager presents Cogent as a transformational investment opportunity following the Sprint Wireline acquisition, creating multiple value drivers with asymmetric risk-reward characteristics. The core thesis centers on Cogent's ability to repurpose Sprint's fiber network to address the Wavelengths market, potentially becoming the company's largest business segment. The investment is protected by substantial asset value including $1.5-2 billion in IPv4 addresses, over $1 billion each in data centers and dark fiber, plus $700 million cash from T-Mobile. The IPv4 leasing business represents a particularly compelling opportunity, generating $40 million run-rate revenue at 95% margins with 40% year-over-year growth and minimal churn. Cogent's IPv4 lease pricing at $3.60 annually is significantly below market rates and AWS pricing of $44, providing substantial pricing power. The recent 50% price increase for new customers with no demand impact validates this thesis. The manager projects potential equity value exceeding $10 billion based on growth prospects rather than asset monetization alone.

Pitch Summary:
I trimmed AWI in early 2024 after it enjoyed an incredible burst of performance, +80%, from October 2023 (pre Q3 2023 earnings) to February 2024 (post Q4 2023 earnings). For a business that grew revenue +5% and EPS +15% in 2023, this was exceptionally strong short-term performance for the stock driven by multiple expansion. In October, AWI was trading at a low-teens multiple of near-term earnings and had a steady earnings growth algorithm comprised of (a) price increases above inflation, (b) modest volume growth, and (c) steady margin expansion. I highlighted the quality of the business and AWI's great long-term prospects in a late-2023 Insight. AWI is a fantastic business and the company already possesses dominant market share in the ceilings market while enjoying a stable duopoly-like market structure. This structure likely supports a better risk-adjusted outcome than one in which AWI is more disruptive in its market. It has ambitions to grow moderately faster than its market through product innovation and by continuing to expand into the specialty ceilings and walls businesses. However, as the dominant, non-disruptive player in a market that is not very dynamic, it is unlikely that AWI can move the needle enough on self-help growth initiatives to generate material and persistent outsized growth. That doesn't mean AWI doesn't have an attractive medium- and long-term earnings growth outlook, but it makes me more open to trimming our position if its valuation expands significantly in a short period of time. AWI traded at a low-teens multiple of the company's 2024 earnings as recently as late October, but now trades at around 20x. It isn't an unjustifiably expensive valuation by any means since it is such a high-quality business, but it is closer to fair value than before. With the valuation at these levels, I expect AWI's stock performance will correlate much closer to the company's CAGR of free cash flow per share than it has over the past year. If and when AWI comes back into our buy zone, I will be happy to revisit our position sizing.

BSD Analysis:
The manager executed a disciplined trim of Armstrong World Industries following an 80% price appreciation that expanded valuation multiples beyond attractive levels. The investment thesis recognizes AWI as a high-quality business with dominant market share in ceiling systems operating within a stable duopoly structure. The company's growth algorithm includes pricing power above inflation, modest volume growth, and steady margin expansion, generating consistent earnings growth. However, the manager notes limited growth acceleration potential given AWI's non-disruptive position in a relatively static market. The valuation expanded from low-teens to 20x earnings multiples, moving closer to fair value despite the business quality. The manager demonstrates portfolio management discipline by trimming when valuations become stretched, while remaining open to re-establishing the position at more attractive entry points. The trim also enabled reallocation to more compelling opportunities in cruise lines with superior risk-adjusted returns.

Pitch Summary:
Carvana is the market-leading, pure-play e-commerce used auto retailer, but it only commands 1% market share in a large and stable used car market. We think it has significant future growth ahead. Our position in Carvana became material in May 2022, at which time I wrote and shared an investment memo on it. The stock continued to fall throughout 2022, ending the year very near its lows, as it suffered from significant changes across the business. In particular, it was negatively affected by: 1. Higher financial leverage and higher cost of debt capital, particularly when financing its acquisition of ADESA. 2. Lower customer demand due to rapidly rising rates and significant used car price inflation. 3. Lower unit economics from the combination of (1) and especially (2) above, leaving the company overbuilt on infrastructure with a suboptimal level of inventory, all of which created significant negative operating leverage. 4. Materially lower (and negative) earnings and free cash flow. Stocks don't often drop -99% and recover to become stable, growing businesses. I can think of only a handful of cases, such as American Tower and SiriusXM. It's possible for a good business to fall -99% when it has high operating leverage and high financial leverage and it is hit by a double-whammy of a demand slowdown and credit tightening at the wrong time in its growth phase. I held onto our shares in Carvana (and bought more) because I believed the double-whammy clearly hurt the business in the short-term, but it did not permanently impair its ability to operate and exploit its superior business model in its end market – and because I believed the company had sufficient liquidity to adjust its operations as needed to get through the downturn. In fact, I believe the company's improved operating discipline, catalyzed by the environment which caused the drawdown, has increased its earnings power at every level of unit volumes compared to my prior expectations. Despite increasing our ownership of the company significantly, Carvana ended 2022 as a 1.4% position due to its dramatic decline. Throughout 2023, Carvana righted the ship operationally. It showed massive improvements in unit economics, profitability, and operating efficiency while intentionally keeping unit volumes relatively stable. Doing so enabled it to deploy more efficient and scalable infrastructure and processes which will allow the company to scale faster and more efficiently than before. In Q1, third-party data suggest that Carvana grew its volumes roughly 15% y/y and about 20% q/q, despite not yet pursuing many growth-oriented efforts, which would be observable in inventory levels, which ended Q1 very tight. The company is on the cusp of resuming its long-term growth story. Carvana has a long runway to gain market share in the auto market by delivering faster/better/cheaper used auto transactions to consumers. It has under-utilized fixed infrastructure that it can leverage and grow into with the addition of more labor over the coming years. It can further expand its production footprint to over 3 million units per year. Even then, those 3 million units would represent only about 7.5% market share in the used auto market (although closer to a 15-20% share of its target market). Carvana has significant embedded advantages across multiple dimensions because of its large-scale vertical production and logistics infrastructure, allowing it to differentiate at scale on quality, convenience, selection, and value to buyers and sellers of cars. Its advantages grow with scale. I expect it to be the most efficient and the most profitable auto retailer in the US. It's not hard to pencil out some eye-popping valuation scenarios for Carvana. 3 million retail sales units x $2,500 EBITDA per unit = $7.5 billion of EBITDA, plus additional contribution from its wholesale businesses which, at that scale, likely would contribute another $1 billion or more of EBITDA. The free cash flow conversion on a business of that size would be tremendous, especially because of the commensurate transformation to its balance sheet over the ensuing years. Most likely, Carvana would continue to grow because scale begets more scale – especially when the consumer value proposition of faster/better/cheaper improves as Carvana builds more capacity and capabilities. At large scale, Carvana could have one of the most differentiated customer experiences among all e-commerce companies. I have let Carvana run in the portfolio, despite its large size, because I believe the company has earnings power over $10/share medium-term and over $30 longer-term on the current asset footprint. Even at $75 per share, it trades at a single-digit multiple of my medium-term expectations. It has reasonable line-of-sight (i.e. it does not need significant new, unknown capex) to become a $100-150 billion company, with potential to continue scaling significantly from there.

BSD Analysis:
The manager presents a compelling turnaround thesis for Carvana, emphasizing the company's recovery from near-bankruptcy to operational excellence. The investment case centers on Carvana's dominant position in e-commerce used car retail with only 1% market share, providing substantial runway for growth. The manager highlights the company's improved unit economics and operational efficiency following the 2022 downturn, positioning it to scale more effectively than before. Key valuation metrics include potential earnings power of $10+ per share medium-term and $30+ longer-term, with the stock trading at single-digit multiples of these expectations at $75. The thesis projects Carvana could achieve 3 million annual unit sales generating $7.5 billion EBITDA, supporting a $100-150 billion market cap. The manager emphasizes the company's scalable infrastructure advantages and network effects that strengthen with growth. Risk factors include execution on the growth strategy and maintaining operational discipline during expansion.

Pitch Summary:
We continued to add to our position in Core & Main. The company distributes pipes and fittings used in water and waste-water applications to municipal customers and companies involved in residential and non-residential construction. Water infrastructure in the US has been underinvested in for years and has started to receive funding, including from the infrastructure bill. In addition, we have a long-term bullish view on both residential and non-residential construction which should support a robust volume outlook for the company. The company has also been able to allocate capital to make accretive acquisitions and we expect this to continue.

BSD Analysis:
The manager is increasing the fund's position in Core & Main, driven by multiple structural growth catalysts in water infrastructure and construction markets. The investment thesis is anchored on decades of underinvestment in US water infrastructure, which is now receiving significant government funding through federal infrastructure legislation. This creates a multi-year tailwind for demand in the company's core water and wastewater distribution business. The manager's bullish outlook on both residential and non-residential construction provides additional volume growth drivers across Core & Main's end markets. The company's proven ability to execute accretive acquisitions adds a capital allocation component to the growth story, suggesting management can compound returns through strategic M&A. This combination of government infrastructure spending, construction market recovery, and acquisition-driven growth creates multiple avenues for value creation. The manager appears confident in the sustainability of these trends, justifying continued position building.

Pitch Summary:
We have also initiated a position in Allstate, the insurance business, which stands to benefit from a very positive auto insurance pricing market.

BSD Analysis:
The manager established a new position in Allstate to capitalize on favorable industry dynamics in auto insurance pricing. The investment thesis centers on the company's ability to benefit from a constructive pricing environment in the auto insurance market. This suggests the manager expects Allstate to achieve meaningful premium increases that should drive margin expansion and profitability improvements. The timing of this investment appears strategic, as the manager is positioning to capture the benefits of an improving pricing cycle in property and casualty insurance. Auto insurance represents a significant portion of Allstate's business, making the company well-positioned to benefit from industry-wide rate increases. The manager's confidence in the pricing environment suggests expectations for sustained profitability improvements. This cyclical positioning in insurance reflects opportunistic investing in sectors experiencing favorable supply-demand dynamics.

Pitch Summary:
We added Norfolk Southern, the rail freight business, where we see a cyclical recovery combined with revenue growth, margin harmonisation, and share buy backs.

BSD Analysis:
The manager initiated a position in Norfolk Southern based on multiple value creation catalysts converging simultaneously. The investment thesis combines cyclical recovery expectations with operational improvements and capital allocation benefits. The manager anticipates revenue growth as freight demand recovers, while margin harmonization suggests operational efficiency gains across the railroad network. Share buybacks provide additional shareholder value creation through capital returns. This multi-faceted approach to value creation - combining cyclical tailwinds, operational leverage, and financial engineering - represents a comprehensive bull case. The railroad industry's asset-heavy nature and regulatory barriers create natural competitive moats. The manager appears to be positioning for both near-term cyclical recovery and longer-term operational improvements in this capital-intensive transportation sector.

Pitch Summary:
In contrast to Apple, we are overweight Meta, where we see a company that has reengineered its business through cost discipline and bolstered by the integration of AI within its advertising business. Following Apple's adjustment of its privacy settings on its operating system in 2021, Meta's ad revenue significantly declined due to its reduced ability to target users. What few realised was that Meta owned one of the fastest supercomputers ever built (the AI Research SuperCluster) which was perfectly suited to regaining most of its signal and targeting ability through the use of AI. This acted as a significant support to the share price as ad revenue recovered.

BSD Analysis:
The manager presents a compelling bull case for Meta based on the company's successful business transformation and technological advantages. The thesis highlights Meta's effective cost discipline and strategic AI integration within its advertising platform as key value drivers. The manager demonstrates deep understanding of Meta's recovery from Apple's iOS privacy changes in 2021, which initially devastated the company's ad targeting capabilities. The investment thesis centers on Meta's proprietary AI Research SuperCluster, which the manager views as a competitive moat that enabled the company to rebuild its advertising effectiveness through artificial intelligence. This technological edge allowed Meta to recover its ad revenue and targeting precision, driving share price appreciation. The manager's overweight position reflects confidence in Meta's ability to leverage its AI infrastructure for sustained competitive advantage. The analysis suggests Meta has successfully navigated a major industry disruption and emerged stronger.

Pitch Summary:
Over the period we maintained an underweight position in Apple. Our thesis on Apple is driven by what we see as a company that has meagre growth prospects, that are overly reliant on one product, the iPhone. It is therefore sensitive to a softening in demand which of late has come from China, where Apple is experiencing an increase in competition from the likes of Huawei, and a general hostility towards Western companies. Despite the fundamental performance of Apple stalling, the company still holds a lofty valuation of around 26x P/E. Our underweight in the company proved to be our top relative contributor to performance over the period.

BSD Analysis:
The manager maintains a bearish stance on Apple, citing fundamental concerns about the company's growth trajectory and valuation. The thesis centers on Apple's over-reliance on iPhone sales, which represents a concentration risk as demand softens, particularly in the critical Chinese market. Competitive pressures from domestic Chinese manufacturers like Huawei, combined with broader geopolitical tensions affecting Western companies in China, pose significant headwinds. The manager views Apple's current 26x P/E multiple as excessive given the company's stagnating fundamental performance. This underweight position was the fund's top relative performance contributor during the quarter, validating the manager's cautious stance. The analysis suggests Apple faces both cyclical demand challenges and structural market share erosion in key regions. The manager appears to favor companies with clearer growth catalysts and more reasonable valuations.

Pitch Summary:
Maui Land & Pineapple has generated 20% alpha in a short period, despite no significant company developments. The company's land assets may be appealing during inflationary periods, but it lacks the typical growth dynamics of an operating business. The decision is to exit the position to avoid overstaying and potentially re-enter at a lower price.

BSD Analysis:
Real estate investments, particularly those focused on land, can offer a hedge against inflation. However, companies like Maui Land & Pineapple, which do not have active reinvestment opportunities, may not provide long-term growth. Investors should consider the balance between asset appreciation and the lack of operational growth when evaluating such investments.

Pitch Summary:
Vaxxinity's stock has decreased by nearly 90% since it was initially pitched. The company is struggling, and while there might be a chance to recover some equity value, the current situation is dire. The decision to claim victory on this short position reflects the substantial decline in stock value.

BSD Analysis:
The biotechnology sector, particularly companies focused on vaccine development, can be highly volatile. Vaxxinity's significant stock decline suggests challenges in its product pipeline or market acceptance. Investors should be wary of the inherent risks in biotech investments, especially those without established revenue streams or successful product launches.

Pitch Summary:
Fisker is facing severe financial difficulties and is likely heading towards bankruptcy, either Chapter 11 or Chapter 7. The stock has plummeted over 98% since it was initially discussed, and the cost to borrow shares is high. Given these circumstances, the decision has been made to exit the position.

BSD Analysis:
Fisker's financial instability is evident from its drastic stock price decline and the high borrowing costs associated with its shares. The company's potential bankruptcy indicates a lack of viable turnaround strategies or sufficient capital to sustain operations. Investors should be cautious of the risks associated with companies in the electric vehicle sector that lack strong financial backing or clear paths to profitability.

Pitch Summary:
We initiated a small position in Class A shares of Liberty Global (LBTYA), one of three share classes of Liberty Global. Liberty Global is a mobile communications company with ownership stakes in a number of European operations across Switzerland, the United Kingdom, Belgium, the Netherlands and Ireland. LBTYA trades at a more than 40% discount to our estimate of fair value and we believe company management is focused on closing this gap. The first step will be the spin-off of Liberty Global's Swiss business later this year. We estimate that the Swiss business, when separately listed, could account for more than half of Liberty Global's total current market capitalization and could leave its remaining businesses trading collectively at a more than 60% discount to fair value. The company has a history of aggressively repurchasing its own shares, having reduced share count across all three classes by nearly 60% in the past seven years. Liberty Global has announced a plan to repurchase up to another 10% of its shares this year.

BSD Analysis:
Greenlight Capital views Liberty Global as a classic sum-of-the-parts opportunity trading at a substantial discount to intrinsic value across its European telecommunications operations. The manager estimates LBTYA trades at more than a 40% discount to fair value, with management actively focused on closing this valuation gap through strategic initiatives. The upcoming spin-off of the Swiss business represents a key catalyst, as Greenlight estimates this single operation could account for over half of Liberty Global's current market capitalization. Post-spin, the remaining businesses (UK, Belgium, Netherlands, Ireland) would trade at an even steeper 60% discount to fair value, creating compelling relative value. Management's shareholder-friendly capital allocation history supports the investment thesis, having reduced share count by nearly 60% across all share classes over seven years through aggressive buybacks. The announced plan to repurchase up to 10% of shares this year demonstrates continued commitment to returning capital and unlocking value. Liberty Global's diversified European telecommunications footprint provides exposure to stable cash-generating assets in developed markets. The combination of structural discount, upcoming catalyst events, and management's proven track record of value creation through capital allocation makes this an attractive risk-adjusted opportunity in the communications sector.

Pitch Summary:
We established a small long position in Roivant Sciences (ROIV). ROIV is a biotech company focused primarily on inflammation and immunology therapies. In addition to an exciting pipeline, ROIV has a strong track record of positive trial results and successful monetization of pharmaceutical assets. The market currently believes core ROIV is effectively worthless, as the company has a market capitalization of about $9 billion, but holds over $6 billion of net cash and a $2.6 billion stake in its publicly traded subsidiary, Immunovant (IMVT). We believe there are several valuable assets inside the company, notably a broad patent estate around lipid nanoparticles used in COVID vaccines for which Moderna and Pfizer may owe ROIV several billion dollars in royalties, a potential multi-billion-dollar specialty autoimmune disease drug that recently passed its 7th successful Phase 2 trial and a novel topical agent to treat skin conditions such as psoriasis and atopic dermatitis. Additionally, we believe there are several other promising earlier stage assets inside ROIV. Lastly, the management team continues to find new opportunities to in-license from larger pharmaceutical companies. ROIV recently announced a $1.5 billion share repurchase program.

BSD Analysis:
Greenlight Capital identifies Roivant Sciences as a compelling sum-of-the-parts opportunity where the market is essentially valuing the core business at zero. With a $9 billion market cap but holding over $6 billion in net cash plus a $2.6 billion stake in subsidiary Immunovant, the core operations trade at a significant discount to tangible assets. The investment thesis centers on multiple valuable hidden assets, including a broad lipid nanoparticle patent estate that could generate several billion dollars in royalties from Moderna and Pfizer's COVID vaccine usage. ROIV's specialty autoimmune drug candidate represents potential multi-billion-dollar value, having successfully completed its 7th Phase 2 trial, demonstrating consistent clinical execution. The company's novel topical treatments for psoriasis and atopic dermatitis add additional pipeline value in large addressable markets. Management's proven track record of positive trial results and successful asset monetization, combined with ongoing in-licensing opportunities from major pharmaceutical companies, supports the value creation thesis. The recently announced $1.5 billion share repurchase program demonstrates management's commitment to returning capital and closing the valuation gap. This represents a classic biotech value play with multiple shots on goal and substantial downside protection from cash and liquid holdings.

Pitch Summary:
The title of our Sohn presentation was "Solve AI," which was a play on Solvay's corporate name. Nonetheless, we established another new long position that actually stands to benefit from AI, which we believe is not reflected in the current stock price. HP Inc. (HPQ) sells computers, printers and adjacent products and supplies. We established an initial position at an average price of $30.76 per share, which is about 9x current year earnings estimates. Recent results reflect a two-and-a-half-year cyclical downturn in demand for computers, which followed a mini-boom driven by COVID and related demand for equipment to work-from-home. We believe that we are, at a minimum, on the cusp of a normal PC refresh cycle, which should drive earnings above estimates. HPQ has committed to return 100% of free cash flow to shareholders through buybacks and dividends. The shares have a 3.6% dividend yield and we estimate HPQ has the capacity to buy back 25-30% of the outstanding shares over the next three years. The more exciting opportunity is through a possible AI-driven PC adoption cycle, fueling higher unit prices and a more robust PC market recovery. Currently, investor attention around AI is focused on cloud service providers and related equipment. This summer, Intel plans to release a neural processing unit (NPU), which will allow AI functionality on local devices. Microsoft has teased AI features that are coming in the next Windows update later this year, which may require a computer with an NPU to fully function. One such application is believed to be 'AI Explorer,' which is described as an "advanced Copilot" with a built-in history/timeline feature that turns everything you do on your computer into a searchable repository using natural language. It is said to work across any application and allows users to search for previously opened conversations, documents, web pages and images. While we have spoken with experts that are divided between being enthusiastic and skeptical of an AI PC cycle, we don't believe any of the optimism is currently reflected in the share price.

BSD Analysis:
Greenlight Capital views HP Inc. as an undervalued cyclical recovery play with significant AI upside optionality that the market is overlooking. Trading at just 9x current earnings estimates, HPQ appears attractively valued as it emerges from a two-and-a-half-year PC demand downturn following the COVID work-from-home boom. The manager expects at minimum a normal PC refresh cycle to drive earnings above estimates, supported by the company's commitment to return 100% of free cash flow through dividends (3.6% yield) and aggressive share buybacks. HPQ's capacity to repurchase 25-30% of outstanding shares over three years provides substantial capital return and potential multiple expansion. The more compelling opportunity lies in a potential AI-driven PC adoption cycle, which could fuel higher unit prices and accelerated market recovery. Intel's upcoming neural processing unit (NPU) release and Microsoft's AI-enhanced Windows features, including 'AI Explorer' with natural language search capabilities, could drive hardware upgrade cycles. While expert opinions on AI PC adoption remain divided, Greenlight believes none of this optimism is reflected in the current share price, creating asymmetric upside potential. The investment combines defensive value characteristics with meaningful AI exposure at an attractive entry point.