Investment Pitches

Pitch Summary:
Take one of our largest holdings, Alphabet Inc. (GOOGL), for example. The following question is highly difficult to answer: "How will AI affect Google's dominance in Search over the next ten years?" Still, analysts and investors everywhere are compelled to come up with an answer. Arguably, investors are instead substituting a much easier question: "How is Google performing in the AI development race right now?" Google's Gemini (Bard) project has very publicly had its own unique struggles. On February 26, Alphabet's share price declined over 4% after a debacle involving its generative AI and "woke" culture. The shares continued to slide over the week and into the next as every broadcaster, columnist, and other talking-head questioned whether the company had lost its way. By March 6, the shares had fallen nearly 10% on what I would argue is a non-event. We increased our holdings on the way down. Google may be a step behind in AI development, but these bumps should be expected when dealing with technological frontiers. Furthermore, it hasn't seemed to have an effect on Search up to this point. Search-threatening generative AI projects have been around for well over a year now. Yet, Google's global market share in Search has not been subject to anymore fluctuation than it has over the last decade. Not to mention the fact that Google has latent margin expansion opportunities through cost cutting which seem to be ignored. The shares were trading at a discount to a reasonable estimate of fair value, the business is of great quality, and there were reasons to believe that there could be a behavior-driven mispricing. Is Google having its Kodak moment? I am willing to bet otherwise.

BSD Analysis:
The manager increased Alphabet holdings during AI-related volatility, viewing market concerns as behavioral overreaction rather than fundamental deterioration. The investment thesis centers on Google's enduring search dominance, which has shown no material market share erosion despite over a year of generative AI competition. The manager argues investors are substituting the easier question of current AI development performance for the more complex assessment of long-term search impact. Google's Gemini struggles triggered a 10% decline that the manager characterized as a "non-event," providing attractive entry opportunities. The position benefits from Google's high-quality business model, latent margin expansion potential through cost reduction, and attractive valuation relative to intrinsic value estimates. The manager dismisses "Kodak moment" fears, betting that temporary AI development setbacks don't threaten Google's core search franchise. This contrarian stance capitalizes on availability bias where recent negative AI headlines disproportionately influence investor sentiment despite limited fundamental impact on the underlying business.

Pitch Summary:
Pluxee N.V. is a provider of a specialized and closed-network payments system for customers and merchants. The network is employee benefits focused and initially started with meal and food vouchers. Pluxee maintains a network of employers and merchants and issues prepaid cards for employees to use based on some predefined employer benefit (food stipends, lodging, transportation, medical care, etc.) Pluxee collects a fee from both sides of the network, which has averaged a total 4.2% of volume issued historically. In addition, due to the prepaid nature of the network, Pluxee generates a substantial float which earns additional interest income. The employer benefits come with substantial tax savings for both the employer and the employee, which drives the bulk of the demand for Pluxee's services. Additionally, these benefits are operationally difficult to facilitate without the help of Pluxee or another competitor due to stringent regulatory requirements. The industry has been subject to good returns, but with higher interest rates and broadening tax-exemptions, both profitability and demand for these services have increased. Pluxee earns high returns on capital and benefits from strong barriers to entry (I estimate that the business earns 20% returns on incremental invested capital from payment fees alone). The industry is an oligopoly, but truly defaults to a duopoly between Pluxee and Edenred. Edenred is the #1 player in the space but has recently come under regulatory review for bid rigging in their Italian markets. I view Pluxee as having an attractive valuation with more head room to grow into as an independently focused unit. At our initial purchase, Pluxee traded at around a 7-8% NTM FCF yield depending on how the float is accounted for. Like Syensqo, Pluxee is also a spin-off. There is a growing debate as to whether or not spin-offs still provide sources of good returns. That is a fair concern. Markets change and adapt; it's unlikely that investors would still do well to blindly buy every spin-off like once before. Some, however, still seem to be mispriced for no other good reason. If you look carefully, you can still see signs of the herded selling in less liquid spins. Take Pluxee for example. On February 7, the shares traded down nearly 10% in the opening seconds of the day. By 9:20 (20 minutes into the European session), the discount had been snapped up almost in its entirety. Was there a negative overnight headline? No. Was there any negative news with competitors or the industry? No. It was just that the shares had finally cleared overnight and were available for sale in European retail accounts. A large number sold the newfound holding at their first chance without any hesitation.

BSD Analysis:
The manager invested in Pluxee, a European employee benefits payments network, viewing it as an attractive duopoly play with strong structural advantages. The business model centers on a closed-loop prepaid card system for employee benefits, generating 4.2% fees on transaction volume plus float income from prepaid balances. Tax advantages for both employers and employees drive demand, while regulatory complexity creates barriers to entry. The manager estimates 20% returns on incremental capital from payment fees alone, supported by the oligopolistic industry structure dominated by Pluxee and Edenred. With Edenred facing regulatory scrutiny for bid rigging in Italy, Pluxee appears well-positioned as an independent focused entity. Higher interest rates have boosted both float income and service demand through expanded tax exemptions. The spinoff dynamics created clear mispricing opportunities, evidenced by the 10% intraday decline and recovery on February 7th due to mechanical retail selling. At 7-8% forward free cash flow yield, the valuation appears attractive for this high-quality recurring revenue business.

Pitch Summary:
Syensqo is a high-margin specialty chemicals producer with wide ranging end markets and operating segments. The company spun out from Solvay in December, effectively splitting the legacy organization into commoditized and specialty chemicals. Specialty chemicals producers typically carry moderate pricing power due to high switching costs although volumes are subject to the specific end markets that they are exposed to. Syensqo has some of the best margins in the industry and also one of the broadest end market portfolios. The company has a top-3 position in 90% of its markets based on sales. With spin-offs, theory would say that there is some forced selling into the initial days of trading. This suggests that an advantage could exist for those who are ready to provide liquidity, although in the case of Syensqo, there also could have been an advantage for those who took the time to read the filings. Most professionals rely on data providers such as Bloomberg, CapitalIQ, or FactSet to collect a company's financials. These data providers typically have the numbers correct, but there can occasionally be large discrepancies in unique situations. In the case of Syensqo, for weeks after the company had begun trading, these data providers had net debt listed to be in excess of €4-5 billion. The true net debt is closer to just €1 billion. This €3 billion gap is quite significant for a company that at the time had a market capitalization of less than €9 billion. We were of course not the only lucky ones to notice this (that would be naïve to assume so) but the time that it took for this to be corrected does suggest a lack of investor attention. Given the context of the spin and stale data, it's reasonable to assume that there was an advantage to be had in this situation. In terms of valuation, Syensqo trades at a low multiple both relative to peers and on an absolute basis. Part of this is due to the cyclical nature of the chemicals industry, however, I believe the discount is sufficient to overcome any cyclical headwinds. Additionally, many of Syensqo's peers are calling for a stabilization in volumes this year after significant destocking during 2023. Cyclical pressures may very well continue, but it seems as though we are getting closer to seeing them finally subside. Despite some gains, I still see Syensqo as trading significantly below fair value.

BSD Analysis:
The manager initiated a position in Syensqo, a specialty chemicals spinoff from Solvay, capitalizing on both structural and informational advantages. The investment thesis rests on Syensqo's superior industry positioning with top-3 market share in 90% of its segments and best-in-class margins within specialty chemicals. The manager identified a significant data error where financial providers incorrectly reported €4-5 billion in net debt versus the actual €1 billion, creating a €3 billion valuation discrepancy for a company with sub-€9 billion market cap. This informational edge, combined with typical spinoff forced selling dynamics, provided attractive entry opportunities. The cyclical chemicals downturn from 2023 destocking appears to be stabilizing, with peers indicating volume recovery ahead. Despite some appreciation, the manager believes Syensqo trades at compelling valuations both absolutely and relative to specialty chemical peers, with sufficient discount to weather potential continued cyclical headwinds.

Pitch Summary:
Last quarter, I wrote to you about one of our largest positions, Vestis Corporation (VSTS). At the time, it was one of my highest conviction ideas. I was convinced that this was a situation in which we were likely to have an edge, that the company was likely of above average quality, and that the shares were also likely to be trading at a discount to fair value. I hoped this would be a company that we could hold in the portfolio for years as it progressed in its transformation. However, in early February, after the company announced its quarterly earnings, it became clear to me that my initial assessment of the company's quality and intrinsic value was likely wrong based on the incremental information being given. I decided to cut the position entirely. I mentioned in my initial comments that Vestis had a lot of "wood to chop" before it would realize its full value as a standalone company. Unfortunately, it does not seem as though any wood is being chopped. Management has set targets for the company's progression over the next several years, but the guidance they have given for this year falls short of the pace required to meet long-term targets. This was not new information; management clearly communicated that the targets would have a delayed cadence in their progress. However, what was more concerning, was that the communication revolving around guidance for this year shifted from a story of gradual progress throughout the year to a story of significant progress in the back half of the year. Communication from management regarding pricing actions also moderated significantly, shifting from value-based price increases to "surgical" price increases. Put more simply, it seemed as though the can was being kicked even further down the road. Additionally, the COO (who had experience with their competitor Cintas) resigned for personal reasons. However, management did not confirm that these reasons were not due to disagreements with the company when asked about it on the call. In these situations, there is also often a line in the associated 8-K that confirms that "personal reasons" do not mean "disagreements." In this case, it was absent. The suggested discord among executives and lack of visibility into their strategy is troubling. Without the urgency to execute on these targets, management's ability to deleverage will be hampered. Without progress in deleveraging, Vestis will not be able to acquire regional competitors or organically invest to keep up with Cintas or even UniFirst. I wish them the best but no longer feel comfortable sticking around.

BSD Analysis:
The manager exited Vestis Corporation after initially viewing it as a high-conviction turnaround opportunity, citing deteriorating execution and management credibility. The thesis centered on the company's transformation as a standalone entity following its spinoff, but management's failure to meet interim targets and shifting communication around pricing strategy raised red flags. The departure of the COO with competitor experience, combined with management's evasive response about potential disagreements, suggested internal discord. The manager became concerned that without operational urgency, Vestis would struggle to deleverage and compete effectively against established players like Cintas and UniFirst. Despite realizing gains on the position, the manager acknowledged his initial quality assessment was flawed. This exit demonstrates disciplined risk management when fundamental assumptions prove incorrect, even when the position remains profitable.

Pitch Summary:
Globant S.A. provides outsourced software development, design, and digital marketing services for business customers. Shares fell after the company provided financial guidance that was below Street expectations. While management expects market share gains to continue, 2024 guidance indicates a slowdown in revenue and earnings growth. We remain investors. Despite a broad slowdown in IT spending, the company showed resilient business momentum with 18% revenue growth and 16% EPS growth in the most recent quarter, well above peer levels due to Globant's diversified customer base, favorable geographic mix, and acquisition strategy. We believe Globant has a long runway for expansion in a large global market for IT services.

BSD Analysis:
The manager's thesis on Globant emphasizes the company's relative outperformance and structural advantages despite industry headwinds. While 2024 guidance disappointed investors, Globant's 18% revenue growth and 16% EPS growth significantly exceeded peer performance, demonstrating resilience in a challenging environment. The manager attributes this outperformance to three key differentiators: a diversified customer base that reduces concentration risk, a favorable geographic mix that provides access to growth markets, and a strategic acquisition program that enhances capabilities. Despite the near-term growth deceleration, the manager maintains conviction based on Globant's market share gains and the large addressable market for global IT services. The investment case relies on the company's ability to continue taking share from competitors while the broader IT spending environment eventually normalizes.

Pitch Summary:
Shares of IT services provider Endava plc fell after the company cut guidance for the fiscal year ending June 30, 2024. Growth has slowed over the last year as business customers pulled back on discretionary IT spending due to budget pressures and macroeconomic uncertainty. Last fall, management was seeing early signs of a recovery, but new projects have taken longer to materialize as customers delay spending decisions. Higher expenses from increased staffing to meet anticipated demand weighed on margins as well. Management acknowledged that it misread the market and is taking steps to right-size the cost structure to improve margins. We remain invested because we expect these near-term headwinds to abate over time, leading to better growth as clients embrace digital transformation.

BSD Analysis:
Despite near-term challenges, the manager maintains conviction in Endava's long-term digital transformation thesis. The current weakness stems from cyclical factors as enterprise customers have delayed discretionary IT spending amid macroeconomic uncertainty, forcing management to cut fiscal 2024 guidance. The manager acknowledges management's misstep in over-staffing for anticipated demand that failed to materialize, but views the subsequent cost restructuring as necessary corrective action. The investment case rests on the belief that current headwinds are temporary and that the secular trend toward digital transformation remains intact. The manager expects client spending to normalize as economic uncertainty subsides, positioning Endava to benefit from pent-up demand for digital transformation services across its target verticals.

Pitch Summary:
Shares of alternative asset manager Apollo Global Management, Inc. outperformed after the company reported strong financial results and gave a positive outlook on growth over the next several years. In the most recent quarter, assets under management increased 19% and earnings per share increased 27%. Despite a more dovish interest rate outlook, management maintained 2024 financial guidance, which calls for 15% to 20% growth in fee-related earnings and double-digit growth in spread-related earnings. Fundraising remains strong, which supports management's goal of more than doubling the pace of capital deployment over the next five years. Management remains bullish on private credit due to growth opportunities across fixed income replacement, retirement accounts, and high-net-worth investors.

BSD Analysis:
Apollo's investment case is built on strong execution and favorable secular trends in alternative asset management. The manager highlights impressive recent performance with 19% AUM growth and 27% EPS growth, demonstrating the firm's ability to scale effectively. Management's confidence is evident in maintaining aggressive 2024 guidance despite interest rate uncertainties, projecting 15-20% fee-related earnings growth and double-digit spread-related earnings growth. The thesis is further supported by robust fundraising activity and management's ambitious goal to more than double capital deployment over five years. The manager particularly emphasizes Apollo's positioning in private credit, which benefits from structural shifts as traditional fixed income investors and retirement accounts seek higher yields, creating a multi-year growth tailwind.

Pitch Summary:
Nu Holdings Ltd. is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company's superior product offering will drive continued share gains in large and growing markets.

BSD Analysis:
Nu Holdings represents a compelling digital banking disruption story in Latin America's underbanked markets. The manager emphasizes Nu's exceptional customer acquisition track record, reaching 90 million customers in under a decade primarily through organic word-of-mouth growth, demonstrating strong product-market fit. The investment thesis is supported by continued balance sheet expansion, margin improvement, and successful geographic diversification across Brazil, Mexico, and Colombia. Recent inclusion in the MSCI Brazil Index provides additional institutional support. The manager views Nu's digital-first approach and superior user experience as sustainable competitive advantages that will drive market share gains in large, underpenetrated Latin American financial services markets with significant growth potential.

Pitch Summary:
Shares of insurer The Progressive Corporation outperformed during the quarter after the company reported strong financial results. Earnings for the first two months of the year more than doubled from the same period a year ago due to a significant improvement in underwriting margins combined with accelerating policy growth. Last year, the company pulled back on growth while it applied for large rate increases from state regulators to offset higher inflation. Having achieved adequate rates in most states, management now plans to increase advertising to drive faster policy growth. Competitors are also raising their rates, which should prompt more consumer shopping and faster market share gains for Progressive while supporting healthy margins.

BSD Analysis:
Progressive's investment thesis centers on the company's successful navigation through an inflationary cycle and its positioning for accelerated growth. The manager highlights Progressive's strategic approach of pulling back on advertising while securing substantial rate increases from regulators to restore profitability. With underwriting margins now at healthy levels and earnings more than doubling year-over-year, the company is pivoting back to growth mode through increased advertising spend. The competitive environment appears favorable, as industry-wide rate increases should drive consumer shopping behavior that benefits Progressive's market-leading position. The manager views this as an opportune time to capitalize on market share gains while maintaining strong profitability metrics.

Pitch Summary:
We also initiated a small position in Astera Labs, Inc., a fabless semiconductor company focused on addressing connectivity challenges in data-centric systems. It offers multiple product lines of mixed-signal connectivity products with embedded COSMOS software and have been first to market with their PCIe retimers, Ethernet smart cable modules, and CXL memory controller products, securing over 300 design wins in the short time since its founding in October 2017. These products are critical in solving data and networking bandwidth bottlenecks, signal integrity challenges, and memory capacity limitations that hyperscale customers are facing across their entire data center networks but especially in AI-related applications. Today its Aries PCIe retimers are shipping alongside every NVIDIA GPU with virtually 100% market share, driving significant growth, and the company sells to every hyperscale customer and AI platform provider. In the coming years, its Taurus Active Electrical Cables modules and Leo Compute Express Link controllers could potentially further expand its market, ramping into AI and general-purpose server applications, respectively. Over time, as AI continues to advance, solving networking bottlenecks becomes more important, which should serve as a tailwind to Astera's average content per server opportunity (the faster the PCIe standard becomes, the worse signal loss becomes, requiring either the use of more expensive PCB materials or the use of more retimers – which is more cost efficient). This dynamic together with the strong AI server unit growth should drive solid revenue expansion from $200 million to around $1 billion towards the end of the decade. We also expect the company to benefit from operating leverage with operating margins expanding towards 40%. Lastly, we believe that Astera benefits from solid competitive advantages thanks to its first mover advantage, having solved interoperability challenges between their retimers and dozens of different third-party devices that its chips can connect to.

BSD Analysis:
The fund manager initiated a position in Astera Labs as a pure-play beneficiary of AI infrastructure growth, focusing on critical connectivity solutions for data centers. The investment thesis centers on Astera's dominant position in PCIe retimers, with virtually 100% market share shipping alongside every NVIDIA GPU, and strong relationships with all hyperscale customers. The company addresses critical bottlenecks in AI applications including bandwidth limitations, signal integrity, and memory capacity constraints. Key growth drivers include the structural increase in AI server deployments and the physics-driven need for more retimers as PCIe standards advance and signal loss increases. The manager projects revenue growth from $200 million to $1 billion by decade-end, with operating margins expanding to 40% through operating leverage. Competitive advantages include first-mover status, over 300 design wins since 2017 founding, and complex interoperability solutions that create switching costs. The expanding product portfolio with Taurus cables and Leo CXL controllers provides additional growth vectors beyond the core retimer business.

Pitch Summary:
During the first quarter, we initiated a new position in Viking Therapeutics, Inc., a developer of metabolic disease medicines with a focus on diabetes, obesity, and metabolic steatohepatitis (MASH) (i.e., fatty liver). Viking's lead asset is an injectable and oral version of a GLP-1/GIP combo medication that is a direct competitor to the well-known Mounjaro/Zepbound medicines from Eli Lilly. Viking's second asset is a competitor to Madrigal's just approved MASH asset. Both of Viking's drugs appear to be more efficacious than their competitors, which is the primary basis of the investment thesis bolstered by what are potentially the largest revenue end-markets for the industry ever. The pharmaceutical industry has returned to primary care medicines, meaning large volumes as opposed to high price, after about a 20-year period working in the rare disease space, including oncology. This macro trend is led by the obesity space. For a reference point, 50 million people (or one-third of the current U.S. market) treated at only $200/year, which is significantly lower than current pricing, would result in a $100 billion addressable opportunity just in the U.S.

BSD Analysis:
The fund manager initiated a position in Viking Therapeutics based on the company's promising pipeline in metabolic diseases, particularly obesity and MASH (fatty liver disease). The investment thesis centers on Viking's potentially superior efficacy compared to established competitors like Eli Lilly's Mounjaro/Zepbound, with both injectable and oral formulations of their GLP-1/GIP combination therapy. The manager highlights the massive addressable market opportunity, estimating a $100 billion U.S. market potential based on treating one-third of the population at significantly reduced pricing. The investment aligns with a broader pharmaceutical industry shift back to primary care medicines focused on high-volume, lower-price treatments rather than rare disease specialization. Viking's dual approach targeting both obesity and MASH positions the company to capitalize on what could be the largest revenue opportunity in pharmaceutical history, driven by the growing obesity epidemic and unmet medical needs.

Pitch Summary:
At its core, our investment philosophy is centered on identifying and investing in Big Ideas, which we define as businesses that enable or benefit from disruptive change, have many characteristics of being or becoming platforms with network effects and attractive unit economics, and are likely to become materially larger in the future than they are today. We identified NVIDIA as the company at the epicenter of one of the biggest technological paradigm shifts of the last 50 years as computing is shifting from sequential to accelerated and as we begin to see the early stages of the use cases of generative AI (GenAI) enter the mainstream. Is GenAI real? Is it going to be material, sustainable, and disruptive? Will NVIDIA (and other GenAI leaders and disruptors) benefit from this disruptive change? Our research suggests that the answer to all of these questions is an unequivocal – yes. Is there hype around GenAI? Sure. There is always a hype cycle around major new technologies. Is GenAI a bubble similar to what we saw during the Internet bubble of late 1990s/ early 2000s? We don't think so. First of all, it is important to recognize that while there were many stocks trading at silly valuations on newly invented metrics (peak multiples on peak eyeballs), the internet itself proved to be a paradigm changing disruption, giving birth to a plethora of Big Ideas. But even more importantly, while the rise in NVIDIA's stock price has been nothing short of unprecedented for a company of its size, it was fueled almost entirely by rapid growth in revenues, earnings, and cash flows – not multiples. NVIDIA's stock price exited 2023 with a P/E ratio of 24.7 and ended the first quarter with a P/E ratio of 35. We can debate whether it is cheap or expensive, but it cannot be compared to the triple-digit multiples that were assigned to the perceived market leaders of the early Internet era that were clearly not in as strong of a competitive position then, as NVIDIA is today. It is not lost on us that semiconductors is a notoriously cyclical industry. Historically, the hyperscalers (AWS, Azure, GCP, etc.), who are among NVIDIA's largest customers, have not invested/spent/consumed CapEx in a straight line. It will be more than a mild surprise then if there was no pullback in demand leading to a significant growth deceleration and a potentially meaningful correction in the price of the stock, sometime in the near future. So, it is incumbent upon us to manage the size of this investment appropriately, while continuing to imagine what the future will look like without losing sight of what reality on the ground is today. Then again…NVIDIA is not just a semiconductor company. Many investors have missed the boat thinking that Apple is just a smartphone company, Amazon is just a retailer, and Tesla is just a car company. We have long argued that just like the other three, NVIDIA is a platform. We are more certain of this now than ever before. NVIDIA Corporation sells semiconductors, systems, and software for accelerated computing, gaming, and GenAI. NVIDIA's stock rose 83.2% in the first quarter, driven by continued strong demand for its GPUs that stand at the epicenter of the GenAI revolution. NVIDIA closed 2023 with unprecedented revenue growth at massive scale, with a fourth quarter revenue run-rate just shy of $90 billion, growing over 3.5 times year-over-year with operating margins of 67%. NVIDIA's fourth quarter was even more impressive than numbers suggest considering both the fact that sales to China declined significantly due to U.S. regulations, and as we are nearing the end of the current generation of the Hopper architecture, with the next generation, Blackwell coming out in the third quarter. NVIDIA continues to improve the performance of its chips and systems significantly from generation to generation, thanks to its full-stack approach, optimizing every layer from the chips, through systems, networking, and software. NVIDIA is taking a page from Apple's vertical integration book, adding to its competitive advantage. For example, the recently introduced GB200 NVL72, a liquid-cooled rack with 72 GPUs, interconnected with the latest generation NVLink technology, offers a significant boost to performance with one-fourth the GPUs required to train a 1.8 trillion parameter model, using one-fourth the power. NVIDIA is also removing hurdles for AI adoption through software innovation, such as the recently announced NIMs, which make it easier for companies to adopt GenAI at scale.

BSD Analysis:
The fund manager presents a comprehensive bull case for NVIDIA as the central beneficiary of the generative AI revolution, positioning it as a platform company rather than just a semiconductor manufacturer. The thesis centers on NVIDIA's dominance in AI computing infrastructure, with the company achieving unprecedented scale with Q4 revenue approaching $90 billion and 67% operating margins. The manager emphasizes NVIDIA's full-stack approach, integrating hardware, software, and systems optimization, which creates significant competitive advantages and switching costs. Key growth drivers include the transition from Hopper to Blackwell architecture, software innovations like NIMs that reduce AI adoption barriers, and the company's vertical integration strategy. While acknowledging semiconductor cyclicality risks and potential demand pullbacks, the manager views NVIDIA as a transformational platform company benefiting from multi-decade AI disruption. The investment thesis is supported by strong fundamentals rather than multiple expansion, with the stock trading at reasonable valuations relative to growth.

Pitch Summary:
In February 2024, long-time holding Sodexo separated its benefits and rewards services business segment through a spin-off creating Pluxee. Pluxee's core offer is meal and food employee benefits that are typically issued through cards or digital solutions. A client/company makes a payment of the value to Pluxee who loads it onto the card and delivers it to the client. The client then delivers the card to its beneficiaries/employees. The employees use it at an affiliated merchant to purchase a meal or food and Pluxee reimburses the value. Pluxee is the second largest player in the global employee benefits market. It operates in 31 countries and is the number one or number two player in most of these markets. Its scale creates network effects, and it is difficult to replicate the size of Pluxee's affiliate merchant network or client base. Unlike many recent spin-offs, Pluxee has a strong financial position and an investment-grade credit rating by S&P Global. As a standalone company, it has more opportunities to reinvest in its core business and make bolt-on acquisitions. The company will make investments to enhance its technology and data infrastructure. It will make bolt-on acquisitions to increase its market share in its core business lines. We believe Pluxee will grow faster than the overall employee benefits market and with its scalable business model, we believe its operating margins will improve.

BSD Analysis:
The manager presents a compelling case for the Sodexo spin-off Pluxee, highlighting the company's dominant market position as the second-largest player globally in employee benefits with operations across 31 countries. The investment thesis centers on Pluxee's network effects and competitive moats, including its extensive merchant network and client base that would be difficult for competitors to replicate. The manager emphasizes the company's strong financial foundation with investment-grade credit rating, distinguishing it from typical spin-offs that often carry weaker balance sheets. The standalone structure provides enhanced strategic flexibility for reinvestment in technology infrastructure and bolt-on acquisitions to expand market share. The scalable business model operating in the growing employee benefits market positions Pluxee for margin expansion as it leverages its platform. The manager's confidence in above-market growth rates and improving operating leverage suggests attractive risk-adjusted returns. This appears to be a classic spin-off opportunity where the sum of parts may exceed the whole, with Pluxee benefiting from focused management attention and strategic clarity.

Pitch Summary:
Topicus, up ~40% in the quarter, is the first business spun out of Constellation Software and focuses on acquiring vertical market software across Europe. What we have discovered in the European market is that there is often a niche software solution that serves a specific country, tailored to unique language and regulatory requirements in that country. This leads to a much larger hunting ground and runway than North America alone would provide. We are excited by this capital deployment runway. So far this year, Topicus has outperformed expectations on both organic growth and capital deployed to acquire some of these European software businesses. They have also expanded their business development team across Europe in countries where they have fewer resources. We have found this to be a good leading indicator for regional capital deployment.

BSD Analysis:
The manager expresses strong bullish sentiment on Topicus, highlighting its unique positioning as Constellation Software's European spinoff. The investment thesis centers on Europe's fragmented software market, where country-specific language and regulatory requirements create numerous niche opportunities unavailable in North America. This geographic advantage provides a significantly larger acquisition runway for the serial acquirer model. The company has exceeded expectations on both organic growth and capital deployment in the current year, demonstrating execution capability. Management's expansion of business development teams across underrepresented European countries signals aggressive growth plans and serves as a leading indicator for future deal flow. The 40% quarterly gain reflects strong operational momentum.

Pitch Summary:
ATS Automation is a provider of automated supply chain technology. The business builds factory automation solutions for supply chains in the life science, food & beverage, energy, industrial, and consumer sectors. We reduced our position in ATS in mid-2023 for two reasons that we uncovered during our maintenance research on existing holdings period. First, the business was becoming increasingly reliant on EV battery programs from General Motors (over 40% of the business's revenue backlog was concentrated with one economically sensitive customer) and second, some of ATS's suppliers had seen slowdowns in their own orderbooks which we discovered by talking to European suppliers of the automation industry. Recently, ATS saw GM delay its EV battery program due to slower than expected demand for EVs, leading to negative growth revisions for ATS. We are pleased that the business is rebasing its backlog toward life sciences and food & beverage, which we view as higher quality end-markets. We retain conviction in the long-term potential of the business and had been waiting for the business to price in shorter-term headwinds, which we believe is beginning to be reflected more appropriately in the shares.

BSD Analysis:
The manager maintains a cautiously optimistic view on ATS Automation despite recent headwinds. The fund reduced its position in mid-2023 after identifying concerning customer concentration risk, with over 40% of revenue backlog tied to General Motors' EV battery programs. The thesis was further challenged by supply chain weakness discovered through European supplier research. GM's recent EV program delays validated these concerns, leading to negative growth revisions. However, the manager views the current rebalancing toward life sciences and food & beverage end-markets as positive, considering these higher-quality sectors. The fund retains long-term conviction and appears to be waiting for an attractive re-entry point as the stock prices in near-term challenges.

Pitch Summary:
Palantir is able to solve complex business problems in administration, in production and even in wars (Ukraine and Israel). In 2023, the company's sales revenues increased by 17% to USD 2.23 billion. After a number of lean years, the company reported USD 210 million in profits. The market capitalisation is USD 53 billion. This is an extremely high valuation. But maybe this is the beginning of a new Microsoft. Major customers include big names like Airbus, the Axel Springer Verlag and the British health care system.

BSD Analysis:
Palantir’s moat is mission-critical analytics embedded in government and enterprise decision systems. Switching risk is high once data pipelines and workflows are integrated. Revenue concentration in government creates stability and political exposure. Commercial expansion is promising but still proving scalability. Pricing power exists where value is existential, less so in enterprise pilots. Profitability has improved, but valuation assumes sustained acceleration. Culture and narrative amplify volatility. The bull case is durable AI-driven platform adoption across sectors. Palantir compounds only if deployments convert into standardized, repeatable revenue—not bespoke hero projects.

Pitch Summary:
Notwithstanding the successful restructuring of the group, which is still in progress, Fresenius SE was not able to convince capital markets in the long term. In the end, scepticism gained the upper hand. The new CEO Michael Sen demonstrated has simplified the group’s structures. We see the company on a good path to reach its growth forecast of 3-6% for 2024.

BSD Analysis:
Fresenius’ moat is scale in dialysis and hospital services, but complexity clouds clarity. Dialysis provides recurring cash flow, yet reimbursement pressure caps margins. Hospital operations add volatility and capital intensity. Turnaround efforts focus on portfolio simplification and cost control. Debt levels constrain flexibility. Demographics support demand, but pricing is politically sensitive. Execution discipline will determine whether value unlocks. The bull case is operational reset with margin recovery. Fresenius survives on scale—thrives only with simplification.

Pitch Summary:
Two good pieces of news boded well for Lonza in March: The appointment of former Sigfried CEO Wolfgand Wienand to the position of CEO, and the purchase of a Roche production facility for biologics in the US for USD 1.2 billion.

BSD Analysis:
Lonza sits in the manufacturing backbone of biotech innovation. As a CDMO, it embeds deeply in customers’ development pipelines. Switching mid-process is operationally painful and risky. Biotech funding cycles create volatility in order flow. High-margin biologics capacity remains a structural asset. Capital intensity is heavy, making utilization key. Execution discipline matters more than expansion announcements. This is not speculative biotech. It’s outsourced drug manufacturing infrastructure.

Pitch Summary:
Inchcape is an automotive distributor that works with major manufacturers, representing 60 brands in more than 40 countries. With its global presence, in relatively small markets but with good growth rates, the company can offer a distribution service to the major manufacturers on very good terms. Its customers prefer to focus their sales efforts on the larger markets where it makes sense to invest in a complete sales structure. In smaller markets it is more profitable to use a distributor like Inchcape that can share the costs with multi-brand vehicle sales. Inchcape has gone from being in 29 markets representing 20 brands in 2016 to being present in 41 markets with 60 brands, partly thanks to acquisitions, but also thanks to organic customer acquisition. Inchcape's wholesale distribution margin (+6.9% in 2023) is better than retail sales (1.7%), so it is selling its dealerships to focus only on distribution. In this regard, Inchcape has just announced the sale of its UK dealerships, its last remaining retail business, and is in the process of integrating Derco, a Chilean automotive wholesale distribution company. With Derco, Inchcape has almost doubled its presence in Latin America and is obtaining very good synergies. Inchcape has presented very good results for 2023, with organic sales growth of 12% and profit growth of 35%, reaching a RoCE of 26%. Its debt is 0.8x ebitda. With a capitalization of £3,000m and Free Cash Flow after interest of £313m, it is trading at more than 10% FCFy, which we find very attractive for such a solid company, which is doing well and has the prospect of improving further.

BSD Analysis:
Inchcape is entering 2026 as a highly resilient distribution partner, aiming for a 10% compound annual growth rate in EPS through its "Accelerate+" strategy. The company’s independent distribution model is becoming increasingly valuable to OEMs as they face rising regulatory and competitive pressures, particularly in the rapid transition to New Energy Vehicles (NEVs). While mature markets are seeing a plateau in unit sales, Inchcape is capturing growth in emerging economies through its data-driven operating model and localized market expertise. Management is actively harnessing AI to personalize the aftersales journey and enhance demand forecasting, driving higher customer lifetime value across its diverse brand portfolio. With a diversified geographic footprint and strong OEM partnerships, Inchcape offers a stable, cash-generative play on the evolving global automotive landscape.

Pitch Summary:
In the first quarter of the year, we invested in three new companies, Macfarlane, Inchcape and Ebro. Macfarlane is a British company, based in Glasgow, which is engaged in the production and distribution of high-capacity protective packaging, designed primarily for the industrial sector. Its main customers are UK companies in the aerospace, automotive, logistics and electronic components sectors. It has two closely related businesses; first, the distribution of packaging material, offering warehousing and logistics services to its customers, allowing them to maintain very low inventories but flexibility in production. Second, it is engaged in the design and production of packaging systems. The company has a history of sustained GAP growth, both through its organic evolution and through the acquisition of smaller competitors that bring presence in new niches or geographic regions. In recent years, it has closed more than 14 deals that contributed almost half of current sales, at a multiple of between 5x and 6x ebitda. Despite these acquisitions, the company has virtually no debt, not least because of the synergies and cost savings achieved by closing redundant logistics centers and warehouses once the acquired companies are integrated. Sales in 2023 were 3.3% lower than in the previous year, but gross margin improved from 34% to 38% and Macfarlane reported its highest earnings ever. Even so, the share price has been depressed and we have been able to invest at an FCFy of over 8%. All in all, this is a very high-quality business, with no debt and trading at a very attractive valuation.

BSD Analysis:
Macfarlane’s moat is customer embedment in protective packaging supply chains. Switching distributors risks operational hiccups few customers want. Margins are modest but stable when volumes cooperate. Growth is incremental and acquisition-led. Pricing power depends on service reliability. E-commerce and logistics demand provide secular support. Cost discipline protects returns. The bull case is steady industrial activity. Macfarlane compounds slowly through service, not innovation.