Investment Pitches

Pitch Summary:
We established a new medium-sized position in Penn National Gaming (PENN) at an average price of $22.69 per share, but, for reasons discussed below, the shares fell to $18.21 by quarter-end. As referenced above, we established a medium-sized position in PENN, an operator of regional casinos. PENN's current enterprise value is just over $4.3 billion, and based on an 8-12x multiple of free cash flow, we value their land-based casinos between $4.3 billion and $7 billion. PENN also competes in online gaming, particularly sports betting, and we believe the market ascribes a substantial negative value to that effort. To be fair, the online segment has a checkered history. In 2020, PENN acquired a minority stake of Barstool Sports, and three years later agreed to purchase the rest, for a grand total of $551 million. That acquisition was a complete failure, and the company wound up abandoning the investment. It also spent $2 billion in 2021 to acquire Score Media and Gaming to establish a better online sports betting platform. Last year, it entered into a deal with ESPN to launch and operate ESPN BET. Successful sports betting franchises can have substantial value. DraftKings is the leader and is valued at over $20 billion. Through ESPN BET, PENN aspires to achieve top-three status in the industry. Given that the market is ascribing negative value to ESPN BET, it's fair to say that after the Barstool fiasco, investors have serious doubts about the company's strategy and management's competence to execute. Were the market to credit PENN with merely 15% of DraftKings' value, that segment alone would be worth $20 per share. PENN launched ESPN BET last November. The launch was largely successful and led them to achieve a top-three user share by adding one million customers in less than two months. This result was much better than expected and enabled PENN to project turning a profit a year earlier than its previous guidance. To accomplish this, the company spent more on upfront marketing to acquire customers than it had indicated. Though we had believed the rationale for increased spending was well understood, the market focused on the higher spend and punished the shares.

BSD Analysis:
Greenlight Capital sees significant value in Penn National Gaming, viewing the market's negative assessment of ESPN BET as creating an attractive entry point. The manager values PENN's land-based casino operations at $4.3-7 billion based on 8-12x free cash flow multiples, essentially covering the entire enterprise value and making the online sports betting segment a free option. Despite past failures with Barstool Sports ($551 million loss) and Score Media ($2 billion acquisition), ESPN BET's successful launch demonstrates management's improved execution, achieving top-three user share with one million customers in under two months. The market's skepticism following previous online gaming missteps has created a valuation disconnect, with ESPN BET trading at negative value despite its promising early metrics. If ESPN BET achieves just 15% of DraftKings' $20 billion valuation, it would be worth $20 per share alone, representing significant upside from current levels. The accelerated profitability timeline, moving up by one year due to strong customer acquisition, validates the strategic partnership with ESPN. However, the market's focus on higher-than-expected marketing spend rather than superior customer acquisition results reflects the ongoing skepticism that creates the investment opportunity.

Pitch Summary:
Last quarter, we wrote about a new small position in Syensqo, a spin-out of Solvay, while alluding to a new top 5 position that we were still accumulating at year-end. That position is the former parent, new Solvay (Belgium: SOLB), which we unveiled on April 3rd at the Sohn Investment Conference in New York. SOLB is an essential chemicals business. Its key products are soda ash (sodium carbonate) and BICAR (sodium bicarbonate), peroxides, silicas, fluorine and rare earth formulations and solvents. We established our position at an average price of €22.89 per share. By our estimates, SOLB earned over €5 pro forma per share last year. This year, due to falling soda ash prices, earnings are likely to be in the high €3s or low €4s. We believe this will be a trough result and that the shares were undervalued at less than 6x those earnings. Over the intermediate term, management intends to cut costs and expand some operations, which if successful, should help generate earnings of almost €7 per share by 2028. The company has a conservative balance sheet and a nearly 10% dividend yield. SOLB shares ended the quarter at €25.30.

BSD Analysis:
Greenlight Capital established a top 5 position in Solvay, viewing the essential chemicals company as significantly undervalued at less than 6x trough earnings. The manager believes current earnings of high €3s to low €4s represent a cyclical bottom due to falling soda ash prices, with pro forma earnings of over €5 per share last year providing a baseline. Management's cost-cutting initiatives and operational expansion plans could drive earnings to nearly €7 per share by 2028, representing substantial upside potential. The investment thesis is supported by Solvay's conservative balance sheet and attractive nearly 10% dividend yield, providing downside protection and current income. The company's essential chemicals portfolio, including soda ash, sodium bicarbonate, peroxides, and specialty formulations, serves critical industrial applications with stable demand characteristics. Greenlight's conviction is evidenced by making this a top 5 position and presenting the thesis at the prestigious Sohn Investment Conference. The 10.5% gain from entry price to quarter-end validates the manager's timing and valuation assessment.

Pitch Summary:
Perrigo, a consumer healthcare company and a prominent player in the consumer self-care sector, has undergone a significant transformation in recent years. Despite this positive trajectory, we believe the current share price fails to adequately reflect the true earning potential of the business. The notable decline in earnings over the past year can be attributed to the ongoing plant-wide reset of its infant formula facilities, with two of the three facilities slated to remain on reset throughout this year. However, looking ahead to 2025, we believe Perrigo is trading at less than 10x normalized earnings. Our earnings analysis excludes the potential value stemming from Opill, the first daily birth control pill available without requiring a prescription in the US. Given its innovative nature, Opill presents a compelling upsize for Perrigo, potentially unlocking significant revenue in the coming years.

BSD Analysis:
Tourlite identifies Perrigo as an undervalued consumer healthcare transformation story trading below normalized earnings potential. The manager attributes recent earnings weakness to temporary infant formula facility resets, with two of three facilities remaining offline through 2024, creating a clear operational recovery catalyst. The less than 10x normalized 2025 earnings multiple suggests significant valuation upside as operations normalize and margins recover. Opill, the first over-the-counter daily birth control pill in the US, represents a major innovation catalyst with substantial revenue potential excluded from current valuations. The manager views Perrigo's transformation into a focused consumer self-care leader as underappreciated by the market. This represents a classic operational turnaround with regulatory innovation upside. The combination of facility normalization and Opill commercialization provides multiple value creation drivers. Tourlite sees compelling risk-adjusted returns in this healthcare transformation play.

Pitch Summary:
With over half of its market capitalization comprised of cash, Roivant remains an attractive opportunity. Roivant has experienced three significant recent developments: 1. Management announced a share repurchase program of up to 1.5 billion shares, including Sumitomo Pharma's stake for $648 million ($9.10 per share), which is highly accretive to shareholders. 2. Arbutus secured victories in three out of four claims during the latest Claim Construction Hearing, particularly winning the claim supportive of the '378 patent. 3. Brepocitinib reported robust data from their Phase 2 Neptune study in non-infection uveitis (NIU) and is poised to commence a Phase 3 program in the latter half of the year. The NIU indication remains a substantial potential revenue opportunity for Roivant, estimated at over a billion dollars.

BSD Analysis:
Tourlite presents a compelling bull case for Roivant Sciences, emphasizing the company's substantial cash position representing over half its market capitalization as downside protection. The massive 1.5 billion share repurchase program, including the $648 million Sumitomo Pharma stake acquisition at $9.10 per share, demonstrates aggressive capital return and management confidence. The Arbutus patent litigation victories, particularly the supportive '378 patent claim, strengthen Roivant's intellectual property position and potential royalty streams. Brepocitinib's robust Phase 2 Neptune study data in non-infection uveitis provides a clear path to Phase 3 trials and potential billion-dollar revenue opportunity. The manager views Roivant as offering asymmetric risk-reward with significant cash backing and multiple value catalysts. This represents a diversified biotech platform with reduced single-asset risk. The combination of defensive cash position and offensive growth catalysts creates an attractive investment profile.

Pitch Summary:
Our thesis was driven by a catalyst tied to a significant litigation payout expected in Q1 2024. At the end of 2023, Esperion's stock saw substantial appreciation. The $125 million settlement received in January, while falling short of the initial $300 million expectation, extended the business's cash runway. As our thesis has played out, we exited our position in January. Due to the stock selling off on the litigation announcement, it resulted in a detraction from first quarter performance, although a net profitable trade.

BSD Analysis:
Tourlite executed a catalyst-driven investment in Esperion Therapeutics based on anticipated litigation proceeds, demonstrating their event-driven investment approach. The manager's thesis centered on a significant legal settlement expected in Q1 2024, which materialized at $125 million versus initial $300 million expectations. Despite the lower-than-expected settlement amount, the proceeds extended Esperion's cash runway and provided financial flexibility. The position was successfully exited in January following the catalyst realization, though subsequent stock weakness created a performance headwind. This represents a classic special situations investment where the manager identified a specific catalyst and executed around the event. The trade's profitability despite Q1 performance impact demonstrates disciplined risk management. Tourlite's approach reflects expertise in biotech litigation catalysts and event-driven opportunities.

Pitch Summary:
Purple is part of our "broken stocks" basket where we believe current valuations present attractive asymmetric opportunities. These businesses have significant upside once macroeconomic headwinds abate and business fundamentals reaccelerate. Purple has new management, changed its business model, sentiment on housing related stocks is bottoming and consensus estimates are low. We don't necessarily believe these share prices will return to their all-time highs, but in many cases, a 2-5x is within reach under reasonable assumptions. Purple and RealReal (REAL) are the two largest in the basket.

BSD Analysis:
Tourlite positions Purple Innovation as a contrarian value play within their "broken stocks" strategy, targeting companies with significant asymmetric upside potential. The manager identifies multiple catalysts including new management leadership, business model transformation, and improving housing market sentiment. Low consensus estimates provide a favorable setup for potential earnings surprises as macroeconomic headwinds subside. The 2-5x return potential reflects the manager's confidence in Purple's recovery trajectory without requiring a return to historical peak valuations. This represents a classic turnaround investment thesis betting on operational improvements and multiple re-rating. The housing-related exposure provides cyclical leverage as market conditions normalize. Tourlite views current valuations as disconnected from Purple's fundamental improvement potential.

Pitch Summary:
APi Group continues to make strides in integrating Chubb, demonstrating positive organic growth in fiscal year 2023 with recurring service revenue on an upward trajectory. We anticipate further margin expansion in 2024. We continue to believe APG is a highly attractive opportunity with a cash earnings yield of double its peers. Management's strategic decision to repurchase 16.3 million shares from Viking and Blackstone (in exchange for preferred shares) at approximately $37 per share not only streamlines APG's capital structure but also presents a highly accretive opportunity for long-term shareholders. On April 15th, APi announced the acquisition of Elevated Facility Services Group, a leading independent service provider of elevator maintenance, repair, and modernization. While we anticipate delving deeper in future letters, we find the addition of this new vertical, the potential for further tuck-in M&A activity, and the prospects for cross-selling opportunities to be interesting.

BSD Analysis:
Tourlite presents a compelling value proposition for APi Group, emphasizing successful integration of the Chubb acquisition and strong organic growth momentum. The manager highlights APG's attractive valuation with cash earnings yields double that of industry peers, suggesting significant undervaluation. The strategic share repurchase from Viking and Blackstone at $37 per share demonstrates management's confidence while simplifying the capital structure through preferred share exchanges. The recent acquisition of Elevated Facility Services Group expands APG's service verticals into elevator maintenance, creating cross-selling opportunities and platform for additional tuck-in acquisitions. Recurring service revenue growth provides earnings visibility and margin expansion potential. The manager views APG as benefiting from both operational improvements and multiple expansion. This represents a classic value play with operational catalysts and capital allocation discipline.

Pitch Summary:
FTAI continues to experience favorable developments in its aerospace segment. Given the current aircraft shortage, we believe that FTAI's leasing and aerospace businesses are positioned to capitalize. The heightened demand for aircraft leases will drive the need for efficient maintenance solutions, positioning FTAI's modular factory as a quick and cost-effective option. Additionally, the pending PMA approval serves as a near-term catalyst, further enhancing the company's growth prospects in the aerospace sector.

BSD Analysis:
Tourlite maintains a bullish stance on FTAI Aviation, capitalizing on structural aircraft supply shortages driving favorable industry dynamics. The manager identifies FTAI's dual positioning in both aircraft leasing and maintenance as a strategic advantage during periods of constrained aircraft availability. The company's modular factory approach provides cost-effective and rapid maintenance solutions, addressing critical industry bottlenecks. The pending Parts Manufacturing Approval (PMA) represents a near-term regulatory catalyst that could unlock additional revenue streams and margin expansion. The thesis centers on FTAI's ability to monetize aircraft scarcity through both leasing premiums and maintenance demand. This cyclical positioning appears well-timed given current supply chain constraints in aerospace. The manager views FTAI as benefiting from multiple aerospace tailwinds simultaneously.

Pitch Summary:
FIP has continued to exceed expectations as business fundamentals are in the early innings of inflection, as FTAI was a year ago. FIP is strategically positioned with various options to optimize its balance sheet. With Jefferson Terminal witnessing a steady uptick in throughput volumes from executed contracts, the potential sale of this asset remains on the table. Additionally, Transtar's growth trajectory, driven by price adjustments and the establishment of a new car repair facility, positions it favorably, with a current estimated value of a billion dollars.

BSD Analysis:
Tourlite presents a compelling bull case for FTAI Infrastructure, emphasizing the company's early-stage fundamental inflection similar to FTAI Aviation's trajectory a year prior. The manager highlights FIP's strategic positioning with multiple balance sheet optimization options, including the potential divestiture of Jefferson Terminal. The terminal's improving operational metrics, evidenced by rising throughput volumes from executed contracts, supports the asset's monetization potential. Transtar's billion-dollar estimated valuation is driven by pricing power and capacity expansion through a new car repair facility. The manager views FIP as benefiting from infrastructure tailwinds and operational leverage. The pitch suggests significant value creation potential through both organic growth and strategic asset optimization. This represents a high-conviction position in the manager's infrastructure investment thesis.

Pitch Summary:
Cellnex (CLNX SM) was the sole detractor to performance as rate sensitive stocks underperformed during the quarter. Typically, tower assets are inversely correlated with yields due to their bond-like characteristics, resulting in a technical weakness in these stocks during periods of rising yields. From a fundamental perspective, however, we note several improvements that were highlighted during Cellnex's recent capital markets day which we attended. Firstly, the business is improving their capital allocation significantly by increasing shareholder return through dividends and buybacks. With dividends growing 7-8% per annum and €4bn earmarked for share buybacks, this alone should deliver a material boost to investor returns over the next several years. Secondly, the company is pursuing non-core asset sales to simplify their tower portfolio, improving profitability and using the proceeds to reduce leverage and accelerate the above mentioned shareholder returns. Cellnex are able to sell assets at highly attractive multiples due to robust demand for towers from private equity and infrastructure fund buyers. These buyers are sitting on elevated levels of dry powder and are prioritising high-quality investments in the current interest rate environment. Several of these buyers have flagged that towers offer the most attractive combination of business quality and secular growth, with the latter due to the growing demand for mobile data. Mobile data traffic is expected to grow close to 20% per annum over the next several years as new applications, such as mobile gaming and video streaming, consume significantly higher levels of data. For example, the average amount of mobile data used in video streaming is over 80,000x greater than simply sending an email. This combined with the rollout of new mobile networks such as 5G is driving greater demand for cell towers over time, benefitting the likes of Cellnex. Finally, Cellnex trades at an attractive valuation multiple of ~13.0x EBITDA which compares to multiples of over 20.0x for assets they are selling, which are of comparatively lower quality to their core business. Applying a fair multiple on a conservative basis of 18.0-20.0x EBITDA would result in an internal rate of return (IRR) of over 20% on a 3-year basis, among the highest in our portfolio today. Overall, we remain convinced in the long-term thesis for Cellnex and we have been using the weakness in the share price over the quarter to add to our position.

BSD Analysis:
Despite short-term underperformance due to rate sensitivity, Stenham maintains a strong bull thesis on Cellnex based on improved capital allocation and attractive valuation. The manager highlights significant shareholder return enhancements with 7-8% annual dividend growth and €4bn in share buybacks planned. The company is simplifying its portfolio by selling non-core assets at attractive 20x+ EBITDA multiples to private equity buyers with elevated dry powder, using proceeds to reduce leverage and accelerate shareholder returns. Secular growth drivers remain compelling with mobile data traffic expected to grow 20% annually driven by data-intensive applications like gaming and streaming, which consume 80,000x more data than email. The 5G rollout is creating additional tower demand over time. At 13x EBITDA versus 20x+ for asset sales, Cellnex trades at a significant discount to intrinsic value. Applying a conservative 18-20x EBITDA multiple suggests over 20% IRR potential over three years, among the highest in the portfolio. The fund is using recent weakness to add to the position.

Pitch Summary:
Leveraging some of the insights gathered from our work on the aerospace sector, we initiated a position in Airbus (AIR FP) in January. Similarly to the engine makers, the company enjoys a dominant position in a secularly growing market. Yet, we believe Airbus is also differentiated as it stands at the edge of an inflection in growth. Airbus' deliveries have remained below pre-pandemic levels for the past four years, as airlines initially preserved cash and supply chains were subsequently constrained. During that period, considerable pent-up demand was accumulated and is now poised to be released. Today, the company's backlog stands at an all-time high, with its orderbook sold out until the beginning of the next decade, and deliveries expected to grow twice as fast as their structural rate over the years ahead. In the aftermath of Boeing's door plug incident on Alaska Airlines flight 1282, the company is now facing material delivery and certification delays. With the A320 Family sold out until the early 2030s, Airbus is limited in its ability to exploit Boeing's current quality issues and gain share over the 737MAX. Nevertheless, should airlines doubt Boeing's ability to resolve these issues rapidly, new orders could increasingly skew towards Airbus, fuelling a longer-term market share shift. This was illustrated by key Boeing customers, such as United Airlines, recently fighting for scarce delivery slots on Airbus' schedule. In our view, corporate culture is an underappreciated factor which can often have profound implications for long-term shareholder value creation. Over the past two decades and especially since its 1997 merger with McDonnell Douglas, Boeing has been reinvesting less into its business in comparison to Airbus, prioritising short-term shareholder gratification at the expense of long-term customer satisfaction, and, ultimately, passenger safety. From our perspective, Boeing's recent challenges are rooted in an inferior culture and should translate into a relative premium for Airbus.

BSD Analysis:
Stenham initiated a position in Airbus based on the company's dominant market position and an inflection point in growth trajectory. The manager highlights that Airbus deliveries have remained below pre-pandemic levels for four years due to cash preservation and supply chain constraints, creating substantial pent-up demand now ready to be released. The company's backlog stands at all-time highs with orderbooks sold out until the early 2030s, positioning deliveries to grow at twice the structural rate. Boeing's quality issues following the Alaska Airlines door plug incident are creating additional competitive advantages, with key Boeing customers like United Airlines seeking scarce Airbus delivery slots. The fund emphasizes corporate culture as an underappreciated value driver, noting that Boeing has consistently under-invested in R&D compared to Airbus since the 1997 McDonnell Douglas merger, prioritizing short-term returns over long-term safety and customer satisfaction. This cultural divergence should translate into a sustained premium for Airbus as airlines increasingly prioritize safety and reliability over the coming decade.

Pitch Summary:
Our aircraft engine-maker holdings in General Electric (GE US) and Safran (SAF FP) were among the top contributors to performance during the quarter. Through their joint venture CFM International (CFMI), GE and Safran are the world's largest aircraft engine-maker. On the supply side, the industry's stringent performance and safety requirements inherently foster an oligopolistic structure, with CFMI holding a dominant share exceeding 70% of the global narrowbody engines market. On the demand side, the industry is supported by a powerful secular tailwind, as people's propensity to travel rises alongside their wealth, resulting in global miles flown having outpaced GDP by ~2x over the past two decades. In our view, the interplay of these dynamics offers promising long-term prospects for the aerospace industry, in particular for the engine-makers. During the first quarter, GE returned 38% and Safran 32% as these factors carried forward strong momentum from last year. As discussed in previous letters, we believe we are in a golden era for the aircraft engine aftermarket, underpinned by the combination of strong air travel and supply chain constraints, translating into a higher-for-longer utilisation of the existing aircraft fleet and, ultimately, an increased demand for engine maintenance. In addition, GE outperformed Safran as our idiosyncratic thesis around the separation of GE Vernova (their power & renewables business) unfolded, with the spin-off successfully executed in early April leaving GE as an attractive pure-play aerospace company. The outlook for engine makers remains favourable in our view, with aftermarket growth at above-average levels. This positive outlook is supported by the carryover of unfulfilled shop visits from last year, coupled with delays in new aircraft deliveries stemming from Boeing's recent challenges, further intensifying utilisation rates of the existing fleet.

BSD Analysis:
Stenham's Safran thesis is built on the company's dominant position in the aircraft engine market through the CFMI joint venture with GE, controlling over 70% of the narrowbody engine market in an oligopolistic industry structure. The manager emphasizes powerful secular demand drivers, with air travel growth outpacing GDP by 2x over two decades as wealth creation drives increased travel propensity. The fund believes the industry is in a "golden era" for aftermarket services, with strong travel demand and supply chain constraints extending aircraft utilization and driving higher maintenance needs. Boeing's recent quality challenges are creating additional tailwinds by delaying new aircraft deliveries and forcing airlines to utilize existing fleets longer. The investment case combines oligopolistic market dynamics, secular growth in air travel, high-margin aftermarket exposure, and favorable industry dynamics from supply chain disruptions. While Safran underperformed GE due to the latter's corporate restructuring catalyst, the fundamental thesis remains strong with above-average aftermarket growth expected to continue.

Pitch Summary:
Our aircraft engine-maker holdings in General Electric (GE US) and Safran (SAF FP) were among the top contributors to performance during the quarter. Through their joint venture CFM International (CFMI), GE and Safran are the world's largest aircraft engine-maker. On the supply side, the industry's stringent performance and safety requirements inherently foster an oligopolistic structure, with CFMI holding a dominant share exceeding 70% of the global narrowbody engines market. On the demand side, the industry is supported by a powerful secular tailwind, as people's propensity to travel rises alongside their wealth, resulting in global miles flown having outpaced GDP by ~2x over the past two decades. In our view, the interplay of these dynamics offers promising long-term prospects for the aerospace industry, in particular for the engine-makers. During the first quarter, GE returned 38% and Safran 32% as these factors carried forward strong momentum from last year. As discussed in previous letters, we believe we are in a golden era for the aircraft engine aftermarket, underpinned by the combination of strong air travel and supply chain constraints, translating into a higher-for-longer utilisation of the existing aircraft fleet and, ultimately, an increased demand for engine maintenance. In addition, GE outperformed Safran as our idiosyncratic thesis around the separation of GE Vernova (their power & renewables business) unfolded, with the spin-off successfully executed in early April leaving GE as an attractive pure-play aerospace company. The outlook for engine makers remains favourable in our view, with aftermarket growth at above-average levels. This positive outlook is supported by the carryover of unfulfilled shop visits from last year, coupled with delays in new aircraft deliveries stemming from Boeing's recent challenges, further intensifying utilisation rates of the existing fleet.

BSD Analysis:
Stenham presents a compelling bull case for GE centered on their dominant position in aircraft engines through the CFMI joint venture with Safran, which controls over 70% of the narrowbody engine market. The manager highlights powerful secular demand drivers, with global air travel outpacing GDP growth by 2x over two decades as rising wealth increases travel propensity. The fund emphasizes they are in a "golden era" for the aftermarket business, driven by strong air travel demand and supply chain constraints that extend aircraft utilization and increase maintenance needs. A key catalyst was the successful spin-off of GE Vernova in April, creating a pure-play aerospace company and unlocking value from the conglomerate structure. Boeing's recent quality issues are creating additional tailwinds by delaying new aircraft deliveries and forcing higher utilization of existing fleets. The investment thesis combines oligopolistic market structure, secular growth drivers, high-margin aftermarket exposure, and corporate restructuring catalysts to drive above-average returns.

Pitch Summary:
Our semiconductor holdings in ASML (ASML NA) and Applied Materials (AMAT US) were among the top contributors to performance during the quarter. The PHLX Semiconductor Sector Index (SOX) rallied 17% over the period while ASML and Applied Materials outperformed, returning 31% and 27%, respectively. As capital equipment providers, both companies produce the machinery used to manufacture semiconductors. These companies are benefitting from the long-term secular growth in the cost of producing the most advanced chips as complexity in these processes is increasing exponentially. Ten years ago, the cost of building a facility capable of producing the most advanced chips at the time would require c.$1bn of capital. Today, the cost of building the most advanced chip-making facilities is upwards of $20bn, making just one of these facilities among the three most expensive sites in the world. Typically, ~80% of these outlays are in the machinery required, meaning the capital equipment companies are significant beneficiaries of the growing costs in semiconductor manufacturing. More recently, the industry found itself in the crosshairs of geopolitical tensions. Semiconductor sovereignty is becoming increasingly important; as of today, over 80% of the world's semiconductors are manufactured in South East Asia. Other regions, such as the US and Europe, are recognising the importance of semiconductors and are pushing for localised production. In fact, in Q1 2024 alone, Samsung committed to double their capital spending on chip making facilities in the US from $22bn to $44bn while Taiwan Semiconductor Manufacturing Co. (TSMC) committed to increase their spending in the US by $25bn. These investments are hugely significant in the context of a semiconductor equipment market that is worth c.$93bn today, as this will translate into sizeable demand for new equipment for these facilities. Finally, the industry continues to be buoyed by the rising demand for chips being driven by Artificial Intelligence (AI). AI is driving not only the need for more chips, but also exponentially more advanced chips and, as per the above, both will translate into rising equipment demand. For example, the latest generation of iPhones uses Apple's A16 chip, capable of processing 17 trillion operations per second, referred to as 17 TOPS. Meanwhile, Nvidia's latest generation of products used for AI (GB200 GPU) will have 10,000 TOPS or, said differently, the ability to process almost 600x more operations per second than an iPhone 15. While these points clearly reflect our positive long-term view on the space, we are cognisant that near-term valuations in the sector have meaningfully expanded as a result of market euphoria around AI. As such, we are carefully managing our exposure and maintaining our valuation discipline.

BSD Analysis:
Stenham's Applied Materials thesis mirrors their ASML position, focusing on the structural growth in semiconductor equipment demand driven by exponentially increasing chip manufacturing complexity. The manager emphasizes that facility costs have increased 20x over the past decade, with equipment representing 80% of these outlays, directly benefiting Applied Materials. Geopolitical semiconductor sovereignty initiatives are creating substantial incremental demand, with major players like Samsung and TSMC committing $69bn in additional US investments. The AI revolution is driving demand for exponentially more powerful chips, with next-generation processors requiring 600x more processing capability than current consumer chips. While the fund acknowledges stretched valuations from AI euphoria, they maintain disciplined exposure to capture the long-term secular growth opportunity. The investment case is underpinned by oligopolistic market dynamics, massive capital reallocation trends, and the critical role of equipment providers in enabling next-generation semiconductor manufacturing.

Pitch Summary:
Our semiconductor holdings in ASML (ASML NA) and Applied Materials (AMAT US) were among the top contributors to performance during the quarter. The PHLX Semiconductor Sector Index (SOX) rallied 17% over the period while ASML and Applied Materials outperformed, returning 31% and 27%, respectively. As capital equipment providers, both companies produce the machinery used to manufacture semiconductors. These companies are benefitting from the long-term secular growth in the cost of producing the most advanced chips as complexity in these processes is increasing exponentially. Ten years ago, the cost of building a facility capable of producing the most advanced chips at the time would require c.$1bn of capital. Today, the cost of building the most advanced chip-making facilities is upwards of $20bn, making just one of these facilities among the three most expensive sites in the world. Typically, ~80% of these outlays are in the machinery required, meaning the capital equipment companies are significant beneficiaries of the growing costs in semiconductor manufacturing. More recently, the industry found itself in the crosshairs of geopolitical tensions. Semiconductor sovereignty is becoming increasingly important; as of today, over 80% of the world's semiconductors are manufactured in South East Asia. Other regions, such as the US and Europe, are recognising the importance of semiconductors and are pushing for localised production. In fact, in Q1 2024 alone, Samsung committed to double their capital spending on chip making facilities in the US from $22bn to $44bn while Taiwan Semiconductor Manufacturing Co. (TSMC) committed to increase their spending in the US by $25bn. These investments are hugely significant in the context of a semiconductor equipment market that is worth c.$93bn today, as this will translate into sizeable demand for new equipment for these facilities. Finally, the industry continues to be buoyed by the rising demand for chips being driven by Artificial Intelligence (AI). AI is driving not only the need for more chips, but also exponentially more advanced chips and, as per the above, both will translate into rising equipment demand. For example, the latest generation of iPhones uses Apple's A16 chip, capable of processing 17 trillion operations per second, referred to as 17 TOPS. Meanwhile, Nvidia's latest generation of products used for AI (GB200 GPU) will have 10,000 TOPS or, said differently, the ability to process almost 600x more operations per second than an iPhone 15. While these points clearly reflect our positive long-term view on the space, we are cognisant that near-term valuations in the sector have meaningfully expanded as a result of market euphoria around AI. As such, we are carefully managing our exposure and maintaining our valuation discipline.

BSD Analysis:
Stenham presents a compelling bull case for ASML based on multiple structural tailwinds driving semiconductor equipment demand. The manager highlights the exponential increase in chip manufacturing complexity, with facility costs rising from $1bn to $20bn over the past decade, with 80% of these outlays going to equipment providers like ASML. Geopolitical tensions are accelerating semiconductor sovereignty initiatives, with Samsung doubling US capex to $44bn and TSMC adding $25bn in US investments, creating substantial equipment demand in a $93bn market. The AI revolution is driving demand for exponentially more advanced chips, with Nvidia's latest GPU processing 600x more operations than an iPhone chip. While acknowledging elevated valuations due to AI euphoria, the fund maintains exposure with disciplined position sizing. The thesis is supported by secular growth drivers, oligopolistic market structure, and significant capital reallocation toward domestic chip production across major economies.

Pitch Summary:
CXI is one of only three major suppliers of foreign banknotes to the United States and of US dollar banknotes internationally. Banknotes are typically used for travel and the Covid induced downturn masked major market share gains made by the company after its key competitor Travelex exited the US. CXI is run by Founder Randolph Pinna, who owns 21% of the company and has high integrity, delights customers, and a 35-year track record of building two banknotes businesses that have delivered strong shareholder returns. The company trades on 11x EV/FCF today and we expect earnings to compound at 15+% p.a. over the next three years. That puts the stock on just 5-6x our estimate of FCF in three years' time, net of cash generated in the interim. We started buying shares at US$14 in mid-2022, it trades at US$18.5 today, and we believe intrinsic value will be around US$50 in three years. We attended the company's AGM in Toronto, Canada, and visited its headquarters in Orlando, Florida, this quarter. These gave us an opportunity to speak with many of CXI's management and board members. We continue to see progress on two key opportunities for the company. We think CXI's first large opportunity is to use its cash. The company holds $106mm in cash and $4mm in debt, a huge amount of net cash compared to its $120mm market cap. We estimate that $80mm of this cash needs to be held as physical banknotes so should be thought of as inventories while $20mm is needed as working capital, meaning excess cash that could be deployed is closer to $20mm. One of the reasons the stock is cheap is that investors are concerned management are not allocating capital well. However, CXI began buying back shares this quarter and have an authorization to buy back 5% of the share count which we believe will be fully utilized this year. That means around half of this years' FCF will be deployed into buybacks. Over the next three years that should reduce the share count by 15%. We continue to believe that a potentially excellent use of cash would be for the company to acquire one of its banknote competitors. This would result in large synergies as costs such as vaults, tech, and staff often do not need to be duplicated. Since there are only a few other players in the industry, any acquisition would be large and significantly increase FCF. And at the company's AGM, the CEO publicly stated that additions to senior management have freed up his time to focus on transformational acquisitions. Given the strength of the company's balance sheet, we estimate much of this acquisition could be financed through credit facilities. An acquisition would also demonstrate that the company's cash is not 'trapped' and so likely lead to a significantly higher valuation multiple as investors start pricing in future cash deployment. We are also confident management will not overpay given their conservative nature. We think CXI's second opportunity is to grow outside the United States. The company is one of only three licensed to supply dollar banknotes from the Federal Reserve to banks across the world. We think this market is worth around $380mm in revenues, versus CXI's total revenues over the last twelve months of $83mm. CXI had yet to make any serious progress because the US banking crisis last year made customers reluctant to source banknotes from a small company. That has changed in the last month, with CXI finally opening trust accounts at one of the world's largest providers. The trust will effectively act as a middleman and guarantee large transactions between CXI and its customers for a small fee. Given this solution was found in collaboration with customers, we are hopeful that the company will now be able to capitalize on this opportunity. We expect that investors will greatly reappraise CXI's intrinsic value over time as the business grows outside the US and management deploys cash. We also believe that the potential downside over a 3-5 year horizon is low if we are wrong given the company's fortress balance sheet, 11x EV/FCF valuation, and double-digit growth rate.

BSD Analysis:
Plural Investing presents a compelling bull case for Currency Exchange International, positioning it as an oligopoly player in the foreign banknote supply market with significant untapped potential. The investment thesis rests on two key catalysts: capital deployment and international expansion. With $106mm cash against a $120mm market cap, CXI trades at just 11x EV/FCF despite 15%+ expected earnings growth, creating an attractive entry point at 5-6x projected three-year FCF. Management's recent share buyback authorization and CEO focus on transformational acquisitions address previous capital allocation concerns. The international expansion opportunity is particularly compelling, with CXI being one of only three Federal Reserve-licensed suppliers to a $380mm global market versus current $83mm revenues. Recent trust account arrangements with major providers should unlock this previously inaccessible market. Founder-CEO Randolph Pinna's 21% ownership and 35-year track record provide strong execution confidence, while the fortress balance sheet limits downside risk in this specialized, high-barrier industry.

Pitch Summary:
TerraVest is an acquirer and operator of steel-based storage tank and equipment businesses that has delivered shareholder returns of ~30% p.a. for the last decade. The company generates a 25% post-tax incremental return on tangible capital and has an excellent and aligned management team who own 35% of the business. We first bought shares in TerraVest late last year around C$40, the stock trades at C$70 today, and we think management will continue to compound capital at strong returns for many years to come. The company follows a strategy of acquiring, restructuring, and operating businesses that are generally mom & pops across storage tanks and pressure vessels (~65% of revenues), oil & gas equipment (~20%), and boilers and furnaces (~15%). We believe that TerraVest creates value by acquiring businesses for an average of 10x FCF then restructuring to cut that to 6x, with restructuring the more important and where management spends most of its time. TerraVest is able to increase profits primarily in three ways: (i) By shifting the mindset of mom & pops to focus on FCF over revenues, (ii) by using its scale to procure steel and other materials at a lower cost, and (iii) by sharing resources across businesses such as by consolidating facilities or cross-selling products. The company's five key members of management all earn relatively low base salaries and have the vast majority of their net worth in the stock. All are highly experienced and most are fairly young – CEO Dustin Haw is the key and is 40 – giving them a strong incentive and long runway to continue compounding. The CEO has never sold a share to supplement his relatively modest income, which suggests to us he thinks TerraVest will continue to be successful. We think there remain many businesses and adjacent industries for TerraVest to deploy capital into. The stock has appreciated significantly over the last twelve months but remains reasonably valued at 15x FCF for a business likely to compound earnings at double digit rates. TerraVest does not speak to sell-side analysts, hold earnings calls, or give investor presentations and so the stock is largely undiscovered among institutional investors. We believe the company's intrinsic value will increasingly be reflected as management executes, more investors take notice, and stock liquidity increases.

BSD Analysis:
Plural Investing presents a compelling bull case for TerraVest, a Canadian industrial consolidator that has delivered exceptional 30% annual returns over the past decade. The investment thesis centers on management's proven ability to acquire mom-and-pop steel tank and equipment businesses at 10x FCF and restructure them to 6x FCF through operational improvements. The company's value creation strategy involves three key levers: shifting acquired businesses from revenue-focused to FCF-focused operations, leveraging scale for better procurement costs, and consolidating resources across the portfolio. Management alignment is exceptional with 35% insider ownership and the CEO never having sold shares despite modest compensation. At 15x FCF, the valuation appears reasonable for a business generating 25% post-tax returns on tangible capital with significant runway for continued acquisitions. The lack of sell-side coverage and institutional following suggests the stock remains undiscovered, creating potential for multiple expansion as execution continues and liquidity improves.

Pitch Summary:
As the country's largest healthcare company, UnitedHealth touches just about every aspect of our healthcare system. It's still mostly known for its health plan business, which covers more Americans than anyone else, even though it has also grown to become one of the largest providers of actual medical care—doctors, urgent care, surgeries, etc.—through a division known as Optum that now earns as much for the company as its plans business. Optum includes a wide range of health-related businesses: pharmacy benefit management, medical practice consulting, software, analytics for drug development, and a comparatively small division called Change Healthcare that serves as the primary payments clearinghouse for medical providers. An attack in February by a cybercriminal group shut down the Change Healthcare payments platform, cutting off cash for almost a month to thousands of medical practices. UnitedHealth has since paid a ransom to the hackers, restored the network, and provided $6 billion in interest-free loans/advances, but the general consensus is that it did not exactly cover itself in glory in a moment of crisis. Communication was poor, and the company's reaction time was slow. This debacle is expected to cost at least $1.5 billion, a lot of money, but only less than 0.5% of the company's market value. It's disappointing and embarrassing, but we don't expect the cyberattack and its repercussions to have an ongoing impact on the company's economics. What will have a greater impact is the lower rates from serving Medicare patients. Each year, the Center for Medicare & Medicaid Services (CMS) updates how much it pays providers for the over 10,000 types of procedures it covers, from brain surgery to stitches, and it announced in March that this year's rate would decline by 1.25%. This was harsher than the market was expecting, and healthcare stocks got dinged up. It isn't great for UnitedHealth, but this is also where the company's size and diverse lines of business come into play. UnitedHealth has a lower cost structure than its competitors, and CMS can't reduce its rates so low that providers stop accepting Medicare patients. If some providers get squeezed out, UnitedHealth is in a position to take advantage of that. Also, Medicare and Medicaid are inching away from the traditional fee-for-service model, where a provider receives a payment for each procedure it does and is thus incented to encourage procedures, to a so-called "capitated" model, where a plan provider gets a flat fee for each member in its plan and then covers all the medical costs itself. This gives providers a strong incentive to keep patients healthy by emphasizing preventative care and diligent follow-up after major procedures. The results so far are promising for both reducing costs and improving health, and we expect these kinds of plans to grow. Being both a provider of health plans and medical services—the vast majority of healthcare providers are one or the other—UnitedHealth is in a great position for this shift. They have insights into both sides of the business and can more easily coordinate care. With a relatively low valuation and high expected earnings growth, we are bullish on the stock.

BSD Analysis:
The manager presents a comprehensive bull case for UnitedHealth despite recent headwinds from a cyberattack and Medicare rate cuts. The thesis centers on UnitedHealth's unique dual positioning as both the largest health plan provider and a major healthcare services provider through Optum, which generates equal revenue to the insurance business. While acknowledging the $1.5 billion cost from the Change Healthcare cyberattack represents poor crisis management, the manager views this as a temporary setback representing less than 0.5% of market value. The 1.25% Medicare rate reduction is seen as manageable given UnitedHealth's superior cost structure and scale advantages that position it to gain market share if competitors are squeezed out. The manager highlights the structural shift from fee-for-service to capitated Medicare models as a key catalyst, where UnitedHealth's integrated model provides competitive advantages in care coordination and cost management. The investment case rests on the company's defensive moat, diversified revenue streams, and positioning for healthcare industry evolution, supported by attractive valuation and expected earnings growth.

Pitch Summary:
I believe that years of reduced capital expenditures, along with ESG restricting capital access, combined with Western governments that are openly hostile to fossil fuels, have created an environment for dramatically higher oil prices. While we could purchase oil producers, and we are long shares of Journey Energy (JOY – Canada), I feel it is far more conservative to simply own the physical commodity itself. I believe that this leveraged play on oil gives us the most upside to oil and ultimately inflation, while exposing us to reduced risk when compared to producers.

BSD Analysis:
Kupperman's Journey Energy position reflects his broader oil thesis while acknowledging the superior risk-reward of commodity exposure over equity exposure. The manager identifies a structural supply constraint from years of underinvestment, ESG capital restrictions, and government hostility toward fossil fuels. These factors create conditions for dramatically higher oil prices as supply fails to meet demand. While the fund holds Journey Energy as an oil producer, Kupperman explicitly states preference for physical commodity exposure due to lower risk profiles. The Canadian heavy oil producer provides leveraged exposure to oil price movements while maintaining operational focus in the Western Canadian Sedimentary Basin. This represents a tactical allocation within the broader energy thesis, with the manager favoring commodity futures and options for primary oil exposure.

Pitch Summary:
As the world gets increasingly crazy, I believe that people will come to realize that ownership of precious metals, in physical form, as opposed to in a brokerage account, is part of being financially prudent. They will mostly likely buy those coins from a coin dealer, either in person, or online. A-Mark supplies both of those markets as one of the largest players in online coin brokerage through their JM Bullion, LPM, Silver Gold Bull, Goldline, etc. verticals, along with serving as one of the largest wholesalers to local coin shops. A-Mark also has stakes in two mints (Silver Towne and Sunshine). A-Mark benefits from periods of chaos in two ways. They see transaction volumes increase, and they see the spreads that they can charge widen. During the three years from Fiscal 2021 to 2023, A-Mark earned approximately $7 a share, if you adjust for certain non-recurring items and remove non-cash intangible amortization. We acquired our shares for approximately four times this earnings level, which seems quite cheap for a business with such high returns on capital. That said, the business has seen reduced earnings over the past few quarters, as a result of declining transaction volumes and spreads. I believe that this decline in activity has created a unique opportunity to buy a high-quality business, with substantial insider ownership, at a bargain price. I naturally am enamored of the counter-cyclical nature of the business, which hopefully should help offset the risks to our portfolio in future periods of crisis. I believe that this business can earn as much as $10 a share in such a period of crisis and get a healthy multiple applied to it. For years, I have sought out a way to play an anticipated increase in the prices of precious metals, without the risks of owning a mine. I believe that A-Mark is the ideal proxy for this view and as other investors discover it, the valuation will re-rate.

BSD Analysis:
Kupperman's A-Mark investment represents a leveraged play on precious metals demand without mining risks, focusing on the distribution and trading infrastructure. The company operates dominant online platforms (JM Bullion, LPM) and wholesale networks, benefiting from both volume increases and spread expansion during market stress. The manager acquired shares at 4x normalized earnings of $7 per share, representing attractive valuation for a high-ROIC business with substantial insider ownership. Recent earnings weakness from reduced volumes and spreads creates the buying opportunity, with potential for $10 per share earnings during crisis periods. The counter-cyclical nature provides portfolio diversification benefits during market turmoil. A-Mark's vertical integration through mint ownership (Silver Towne, Sunshine) enhances margins and supply chain control. This represents an infrastructure play on precious metals adoption with strong cyclical earnings potential.