Investment Pitches

Pitch Summary:
Another holding that is firing on all cylinders is the Canadian vertical market software acquirer Constellation Software. What I admire so much about this company and the best serial acquirers is that they do very complicated things so well, and they do it over time. Many people have written in long format about this firm and that's not something I'm going to do here. However, what I want to highlight are 3 things that hit the best serial acquire broadly: 1) Decentralization is a term often used and people say "they are decentralized" without actually explaining what it means in an operational setting. My understanding of this is that the company units are themselves responsible for creating objectives and key measurements based on what they believe they are capable of achieving. How they achieve this is up to them, but they have to report their progress and their achievements. This again is tracked by senior management to ensure that the business is moving in the right direction and that hiccups and best practices can be utilized efficiently. The opposite methodology here is that senior management decides which margin the unit should achieve and then just monitors performance periodically. The reason this way often fails is because of the single thing that Charlie Munger repeated over and over "Show me the incentive and I will show you the outcome". Without ownership and meaning, it's hard for large companies to ensure that units perform as they want. Accountability and ownership are the core of decentralization in my opinion. 2) The best serial acquirers are masters of post-merger integration. This means they don't just acquire a company and let it operate in isolation but rather integrate it in a way that ensures routines quickly take hold and the new company becomes more efficient. They understand that value from an acquisition comes not just from owning the company but from making sure it works smoothly within the existing structure and that they do so fast. What often happens in acquisitions is that a company is brought in, but the integration process is fragmented. Routine documents end up scattered across multiple SharePoint sites and often without clear owners. Employees are left unsure about what constitutes actual company policy, both at a high level and within their specific units. The outcome here is that without a clear structure, it becomes difficult to understand how the unit's objectives align with the broader goals of the company. When this happens, inefficiencies arise, and instead of benefiting from the acquisition, the company struggles with confusion, operational slowdowns, and a lack of "best practices". They are acquired and might share the same name, but they are not operating as "one company". The best acquirers avoid this by having a well-defined integration process that ensures new teams and systems are smoothly incorporated, making sure that routines, policies, and goals are clear from the start. Further, they are godlike in terms of operational efficiency and ensuring value realization post-integration. 3) Lastly, the best serial acquirers are masters of capital allocation, measured in terms of return on invested capital and they focus on the right things: Increasing the free cash flow to its owners over the long run.

BSD Analysis:
The manager expresses strong conviction in Constellation Software as a premier serial acquirer, highlighting three key competitive advantages that drive superior returns. First, the company's decentralized operating model creates accountability and ownership at the business unit level, aligning incentives for optimal performance rather than top-down mandates. Second, Constellation excels at post-merger integration, ensuring acquired companies are efficiently incorporated into the broader organization with clear processes and best practices. Third, the company demonstrates exceptional capital allocation discipline, focusing on ROIC and long-term free cash flow generation. The manager views these operational capabilities as sustainable competitive advantages that enable Constellation to consistently create value through acquisitions. The emphasis on decentralization and integration expertise suggests the company can continue scaling its acquisition strategy while maintaining operational excellence across its diverse software portfolio.

Pitch Summary:
Visa (29,1% weight) experienced for a while a storm due to regulatory noise and while I must admit that the prosecutors wrote a very solid piece of research, in the end, I didn't find many solutions in the paper as an alternative to Visa. That part was pretty weak and there was no chance that a major disruption could happen shortly. When one took the stock price fall into account and compared it to the size of a potential fine, it was pretty clear that the correction was overdone. In my opinion, Visa continues to be one of the best businesses in the world with extremely solid fundamentals along with solid growth. The case is pretty simple if you ask me: The firm is operating with ROCE at 31%, gross margins at 69%, and free cash flow margins at 27%, and is expected to grow its earnings per share over the long run at 13% annually. The driver? There's still way too much cash being used in the world and we are nowhere close to having reached maturity in the digital payment sphere.

BSD Analysis:
The manager maintains a strong bullish stance on Visa despite regulatory headwinds, viewing the recent correction as an overreaction. The investment thesis centers on Visa's exceptional financial metrics including 31% ROCE, 69% gross margins, and 27% free cash flow margins, demonstrating the company's dominant market position and pricing power. The manager expects 13% annual EPS growth driven by the ongoing global transition from cash to digital payments, suggesting significant runway for expansion. The regulatory concerns appear manageable given the lack of viable alternatives to Visa's network. At 29.1% portfolio weight, this represents the manager's highest conviction position, reflecting confidence in Visa's durable competitive moat and long-term growth prospects in the digital payments ecosystem.

Pitch Summary:
There are several good examples I can draw from where we have let winners run to a high degree. The best example I can provide from our current holdings is Netflix. We purchased Netflix during the summer of 2022 at a price of around $200 per share. I summarized my investment thesis in the Q3 2022 letter, which was essentially that Netflix could successfully cut costs and grow revenue with the addition of the ad-supported tier and paid sharing. Either lower costs or higher revenue would have lifted Netflix. If they could execute on both, the stock would have significant upside. By mid-2023, Netflix proved their ability to cut costs (supporting our thesis) but they were just starting to work on improving revenue growth. Investors were skeptical and we felt that the stock was still cheap relative to our assessment of value. We purchased more shares of Netflix at around $350 per share, 75% above our original cost basis. By the end of 2023 and into 2024 it became clear that Netflix could both cut costs and re-accelerate revenue growth. The stock is now over $550 per share and we haven't sold a single share. In fact, we see the fundamentals improving which should result in more upside. As a result of buying the stock well in 2022, significantly adding to it in 2023, and letting it run, Netflix is currently our largest position at a ~14% weight in the Growth Portfolio. While there will be a time to sell Netflix, it won't be simply because the stock appreciated too much.

BSD Analysis:
LVS Advisory demonstrates strong conviction in Netflix through a successful multi-year investment that exemplifies their "let winners run" philosophy. The original thesis centered on Netflix's dual ability to cut costs and grow revenue through ad-supported tiers and paid sharing initiatives. The manager showed discipline by adding to the position at $350 per share (75% above cost basis) when fundamentals were improving but market sentiment remained skeptical. Netflix has delivered on both cost reduction and revenue acceleration, driving the stock from $200 to over $550 per share. At 14% portfolio weight, Netflix represents the fund's largest position and highest conviction holding. The manager continues to see improving fundamentals supporting further upside, demonstrating patience with quality businesses that execute successfully. This case study reinforces their investment philosophy of concentrating in high-conviction winners rather than trimming for valuation concerns.

Pitch Summary:
We recently initiated an investment in Calumet (NASDAQ:CLMT) in the event-driven portfolio. Calumet fits firmly within the "moderate risk, high reward" bucket of our portfolio for reasons that will be apparent. Calumet is a refining and specialty chemical company with three hard catalysts expected to play out in the next year. First, the company is planning to monetize its renewable energy business through either an outright sale or an IPO. Second, CLMT is converting its corporate structure from an obscure master-limited partnership ("MLP") to a Delaware C-Corp. Finally, the company is in the process of refinancing its capital structure with low-cost debt from the Department of Energy. If these catalysts play out as expected, I believe Calumet's shares could be worth over $30 vs. the current share price of $16; although there are notable risks to achieving that outcome. I spent a significant amount of time researching Calumet's renewable energy business and the more I learned about this asset the more I got excited about what it could be worth. The company invested ~$550 million over the past 3 years to reconfigure a dirty refining plant into a low-cost producer of renewable diesel and sustainable airline fuel. With an additional expansion project planned for 2025, Calumet is poised to become the leading provider of sustainable airline fuel ("SAF") in North America. SAF is a renewable jet fuel that currently represents the only viable way for the airline industry to decarbonize over the coming decades. SAF is a proven technology with millions of commercial miles flown and already has an established market in Europe. North American airliners are also eager to blend SAF into their existing jet fuels. While jet fuel is a commoditized market, SAF is in short supply and Calumet will have one of the first scaled operations when its Montana plant expansion project is complete in 2 years. The first stage of the renewable plant's production came online last year and is expected to generate over $200m in EBITDA in 2024. Due to several unique characteristics of the plant including its physical location, access to cheap transportation, and access to cheap inputs, I believe Calumet's renewable energy business is a crown jewel asset that is worth more than the current market cap of the company. Calumet's management intends to take advantage of the current appetite for high-quality renewable projects by monetizing this asset. The company has an ongoing sales process and I believe unitholders will receive a premium valuation for the business at the end of this process. The second catalyst is the conversion of the legal structure from an MLP to a C-Corp. LVS Advisory has had past success investing in companies undergoing C-Corp conversions. MLPs and other obscure legal structures cannot be purchased by most institutional investors due to tax reasons. MLPs are also not eligible for inclusion in a mainstream equity index. As a result, many sub-scale MLPs become orphaned securities with limited trading liquidity. On the other side of a C-Corp conversion, there is a wave of buying from active and passive funds that are suddenly able to own the stock. This improved trading liquidity can help re-rate a stock's valuation higher and open the door to other strategic options including a merger. Taking on a C-Corp conversion causes the General Partner and management team to lose some control over the enterprise; therefore, Calumet's C-Corp conversion demonstrates the General Partner's seriousness in realizing the full value of its assets for minority owners. The final catalyst mentioned is the potential re-financing of CLMT's capital structure with low-cost debt from the Dept. of Energy ("DOE"). This is important because Calumet has a terrible balance sheet with high-interest debt. A low-cost DOE loan in conjunction with the increased cash flow from the renewables project will serve to massively de-risk Calumet's financial position overnight. This is where I see the most risk in the Calumet setup because the DOE financing looks promising but isn't guaranteed at this point. However, if the DOE loan were to fall through, there are likely other, albeit more expensive, sources of financing available. It is unusual to find a company like Calumet with several hard catalysts and such a clear path to unlocking value for minority investors. In my experience, having multiple ways to get paid tends to increase the odds of success in an event-driven situation.

BSD Analysis:
LVS Advisory presents a compelling multi-catalyst thesis for Calumet, targeting an 88% upside to $30 from the current $16 share price. The investment centers on three key catalysts: monetization of the renewable energy business, MLP-to-C-Corp conversion, and potential DOE refinancing. The renewable energy asset appears to be the crown jewel, with $550 million invested over three years to create a leading sustainable aviation fuel (SAF) producer generating over $200 million EBITDA in 2024. The structural conversion from MLP to C-Corp should unlock institutional buying and improve liquidity, historically a successful strategy for the fund. The potential DOE refinancing would dramatically improve the balance sheet by replacing high-cost debt. The manager acknowledges execution risk, particularly around DOE financing approval, but believes the multiple pathways to value creation increase probability of success. This appears to be a well-researched special situation with clear catalysts and timeline.

Pitch Summary:
Since the start, we have always invested 100% of our money in Reysas Logistics. As Reysas' stock went up 5 fold, we started investing money into Reysas GYO. Over time it will probably be our largest position. Our investment result from Reysas & Reysas GYO depends on 2 things: 1) Reysas' property value. 2) Management's investing capabilities. Once a year, a 3rd party company creates property valuation reports for Reysas GYO. Their property valuations have increased as follows: December 2021 400M USD, December 2022 700M USD, December 2023 1B USD. Reysas GYO's rental income in 2023 is around 40M. This will increase to around 65M in 2024. Another 90M is expected from 3 housing projects by 2025. Since 2018, Turkish rules say that if the (lessee) company renting the property is not at least 50% owned outside of Turkey, rents must be paid in Turkish Lira. In Reysas' case, these rents increase every year to match Lira inflation, plus growth in GDP. The problem Reysas had, was that the Turkish inflation statistics were understating real inflation. As a result, the rent increases didn't catch up, making them very cheap. When they expire, Reysas will renew these contracts with better terms. The amount of storage space international tenants are leasing has also increased significantly. This makes it easier for Reysas since such rents are in Euro/USD. The average rental price per sq. ft in Turkey is around 8 USD per year. In Reysas' locations, the average rental price is around 10-15 USD per sq. ft per year. When all properties are rented at market prices, Reysas GYO's earnings will look something like this: Total Storage Space in Sq.Ft 12M, Price Per Sq.Ft 10-15 USD, Solar Earnings 10-20M, Total Real Earnings Per Year 130-200M, Value Today 2-3.5B, Market Cap 400M, Expected Return 5-8x. In this case, Reysas Logistics' earnings share from Reysas GYO would be around 80-130M. Earnings from their other businesses are hard to predict. But if we are right about the management's investing skills, we will see exceptional long-term results. In the end, earnings growth comes from how much money a business gets back from the money it puts in. Management capabilities are something hard to 'measure', but it is crucial to understand. Especially in smaller companies. We see intelligent founders with a long track record of excellent decisions. They earn high returns on their invested money. Growing the business fast inside a growing market. These businesses don't face serious competition. Today, Reysas is being sold to us for around 10 times 2023's earnings. The founders have most of their net worth in Reysas, collectively owning 30.83% of the company. Since our last report in August, the Vice Chairman, Egemen Doven, bought 1,334,678 shares in Reysas and 1,257,106 shares in Reysas REIT. (Approximately 2.5M USD in total) Since no one knows Reysas better than the Father and Son who run it, these buys are a true signal. 2 years ago, we bought Reysas Logistics at a 94M market cap, with a clear value of more than 1B. This doesn't happen often, which is why we put 100% of our money in it. In the last 2 years, the price of each share has grown faster than its real value. Two years ago, we expected a 10- to 20-fold return from Reysas. Today, we expect around a 4-fold return for both companies.

BSD Analysis:
Bilbel Capital presents a concentrated value play on Turkish logistics company Reysas, trading at 10x 2023 earnings with significant asset backing through its REIT subsidiary. The investment thesis centers on two key drivers: rapidly appreciating real estate values (property valuations increased from $400M to $1B over two years) and strong management execution by founder-operators who own 30.83% of the company. The manager highlights rental income growth from $40M in 2023 to an expected $65M in 2024, with additional $90M projected from housing projects by 2025. A key catalyst involves contract renewals at market rates, as current Turkish Lira-denominated leases have lagged inflation, creating embedded value as international tenant demand grows and contracts convert to Euro/USD pricing. Recent insider buying of $2.5M by Vice Chairman Egemen Doven signals management confidence. The fund expects 4x returns from current levels, down from initial 10-20x expectations as the stock has appreciated. Risk mitigation includes substantial land value ($600-900M) and insurance coverage ($160M) providing downside protection even in catastrophic scenarios.

Pitch Summary:
Taking advantage of the government tax schemes; both co-CEOs resigned due to possible regulatory actions against their involvement in a massive PPP loan fraud; the PPP partner Blue Acorn is already under criminal investigation;

BSD Analysis:
P10 aggregates private-market strategies but faces scale disadvantages, fee pressure, and reliance on acquisitions. Fundraising is slowing as LPs retrench. Performance fees are unpredictable, while acquisition debt limits flexibility. Critics view it as a fee aggregator without durable differentiation.

Pitch Summary:
Secure Energy Services Inc ("SES") is a leading Canadian energy waste management and energy infrastructure business headquartered in Calgary, Alberta. The company operates a network of waste processing facilities, wastewater pipelines, industrial landfills, waste transfer and metal recycling facilities. SES historically has been grouped with Canadian energy services companies. This ignores a pivot the company and industry has taken. SES has divested non-core assets and focused on energy waste driven by ongoing production rather than new drilling. SES's industry has also consolidated. On July 24, 2018 peer Newalta Corporation was acquired by Tervita Corp and on July 7, 2021 Tervita Corp was acquired by SES. Such developments allowed SES to improve its adjusted EBITDA margins in 2019 from 28% to 37% in 2022 with a 14.9% return on invested capital and 17.7% levered free cash flow and most recently (December 11, 2023) the company-initiated stock buyback of 8% outstanding shares. The Canadian Competition Tribunal ordered SES to divest facilities formerly owned by Tervita Corporation. On December 11, 2023, SES agreed to sell a portfolio of 30 energy waste treatment and disposal facilities formerly owned by Tervita Corp to Waste Connections Inc. for C$1.075 billion (plus adjustments), for an LTM EBITDA multiple of 7.5x. The transaction value was ahead of market expectations. At announcement, the transaction was nearly two turns above the implied remaining valuation of SES and will allow the company to reduce debt to zero post-close in Q1'24. Post-asset sale, 70% of 2024 adjusted EBITDA corresponds to the Corporation's Environmental Waste Management with a 2024 post-asset sale adjusted EBITDA of $440 - $465 million, or 6.5x the mid-point of guidance post-asset sale proceeds. US waste management peers trading nearly twice the multiple with lower EBITDA margins and lower free cash flow conversion. Precedent transactions among US peers in the 1st to 3rd quartile have occurred at 9.5 – 12.4x multiple or a mean of 11x LTM EV/Adj. EBITDA. US peers have been active in expanding to Canada, beyond the recent Waste Connections Inc. transaction, Republic Services, Inc. acquired Tervita Corp's US assets in 2014 near 9x EBITDA. After the Waste Connections Inc. transaction closes, SES will be unlevered with the financial flexibility to conduct a large stock tender. If valued in line with US waste management peers and recent M&A transactions, SES has potential for 100%+ appreciation.

BSD Analysis:
Alta Fox presents a compelling value opportunity in Secure Energy Services, a Canadian energy waste management company trading at a significant discount to US peers. The manager highlights SES's strategic transformation from a cyclical energy services business to a more stable waste management operation focused on ongoing production rather than new drilling activity. The recent asset divestiture to Waste Connections for C$1.075 billion at 7.5x EBITDA will eliminate debt and provide substantial financial flexibility. Post-transaction, SES trades at approximately 6.5x 2024 EBITDA guidance compared to US waste management peers at nearly twice that multiple. The manager notes superior EBITDA margins and free cash flow conversion relative to US comparables. With precedent M&A transactions in the sector occurring at 9.5-12.4x EBITDA multiples, SES appears significantly undervalued. The company's debt-free balance sheet post-divestiture positions it well for capital returns through share buybacks, with management already initiating an 8% buyback program.

Pitch Summary:
In 2017, I was researching a drug used by ear, nose, and throat ("ENT") doctors. After I was done asking questions about the drug, I would inquire if there were any other drugs or devices that these doctors were using in their practice that were new and exciting. Almost universally, the doctors responded about their early use of the Inspire device for sleep apnea, which had recently launched into the market. At the time, Inspire Medical was a private company that had been spun out of Medtronic in 2007. The feedback that I received on the early patient experience was resoundingly positive. In fact, some of the most positive feedback I have heard in my career. In short, this was game-changing technology that was set to revolutionize care for people with sleep apnea. Over the years, we watched as the company grew revenue at a rapid clip as the technology was adopted by physicians and patients alike. We monitored patient feedback, which was overwhelmingly positive. The words "life-changing" were often cited. However, we always deemed the stock to be too expensive to own in the Fund. Shares of Inspire came under pressure last fall as investors panicked about the impact that GLP-1 drugs would have on the company's growth outlook due to their unprecedented weight loss profiles. We know the GLP-1 drug class well because of our ownership of Emisphere, which was acquired by Novo Nordisk in 2020. It is our opinion that the GLP-1 drug class will represent the largest drug class in the history of the pharmaceutical industry driven by their exciting weight loss profiles and broad health benefits. However, we also understood that most of the patients getting the Inspire device were not obese. In fact, the guidelines did not allow use in patients with body mass index (BMI) greater than 35 until very recently. The average BMI in the Inspire clinical trials was below 30, which we believe approximates the real-world experience. As such, we believe it is more likely that the patient pool increases due to GLP-1 adoption than declines. We accumulated our Inspire position at an average cost of $155 per share. What changed to make us get off the sidelines? For starters, the stock had declined by 53% from the all-time high set in July. The stock sold off sharply on fears that the GLP-1 drug class would eat into future sales. We believe these fears were unwarranted. Second, the company recently crossed the chasm from a money-losing enterprise to one that is expected to be profitable in the years ahead. The company has an efficient corporate structure highlighted by an industry-leading gross margin in the mid-80s. Third, the company expects to launch the Inspire 5 device later this year. We believe the fifth-generation device is light years ahead of competition, which will protect the company's position in the market for the foreseeable future. Lastly, we believe that the company remains in the early stages of the adoption cycle and has many years of exciting growth ahead. The Inspire device competes in a $10 billion market with penetration in the mid-single digits today based on 2023 sales of $625 million. We are forecasting a path to annual earnings greater than $10 per share within five years' time. Assuming a multiple of 30-40 times, we believe the stock could be worth $300-400 per share. The company has a pristine balance sheet ending the year with $470 million of cash and no debt.

BSD Analysis:
Summers Value Partners initiated a position in Inspire Medical after the stock declined 53% from its July highs due to investor concerns about GLP-1 weight loss drugs impacting the sleep apnea device market. The manager's thesis centers on the belief that GLP-1 fears are overblown, as most Inspire patients aren't obese (average BMI below 30 in trials) and the patient pool may actually expand with GLP-1 adoption. The investment case is strengthened by the company's transition to profitability, industry-leading gross margins in the mid-80s, and the upcoming launch of the fifth-generation Inspire 5 device. With only mid-single digit penetration in a $10 billion addressable market and 2023 sales of $625 million, the manager sees substantial runway for growth. The company maintains a strong balance sheet with $470 million cash and no debt, supporting the manager's forecast of $10+ earnings per share within five years and a potential stock price of $300-400.

Pitch Summary:
Overvalued (trading at 23% premium to its peers); further dilution due to cash position barely covering one month of cash burn; declining retention rate of clinicians; shareholders filing a lawsuit for untrue financials; insiders are cashing out;

BSD Analysis:
LifeStance built a large mental health clinic network via acquisitions, but the model is fragile. Integration costs, clinician churn, and reimbursement constraints keep margins under pressure. Telehealth is competitive and capital intensity is high. Growth looks impressive, but cash flow is weak.

Pitch Summary:
In the fourth quarter we took a position in financial services provider Ameriprise (NYSE: AMP). Founded in 1894 and spun out of American Express in 2005, Ameriprise currently partners with over ten thousand financial advisors. These independent, entrepreneurial individuals manage the wealth of and provide financial planning for over two million individuals and insitutions and are effectively small business owners who operate within the framework of the Ameriprise infrastructure. We believe that the wealth management and financial planning business, while facing some temporary headwinds, will remain attractive in the long term. The number of individuals and families with investable assets has grown over recent decades and continues to grow. Unlike many of the bank-owned financial advisory firms Ameriprise is a pure-play financial advice company and is a higher-margin, less capital-intensive business than its highly-leveraged bank competitors. With its low valuation, high growth rate and solid operating metrics the company is the epitome of what we call "quality at a reasonable price". As is typical of the capital-light compounding businesses which we invest in for the long term, the company has returned over eighty five percent of its operating cash flow to shareholders in the form of stock buybacks and dividends over the past ten years. Ameriprise's free cash flow per share has grown at a twenty percent annualized rate and its dividend per share has grown at an eleven percent annualized rate over the past ten years.

BSD Analysis:
The manager initiated a position in Ameriprise Financial, viewing it as a high-quality wealth management pure-play trading at attractive valuations. The investment thesis centers on Ameriprise's differentiated business model of partnering with over 10,000 independent financial advisors who serve 2+ million clients, creating a capital-light, scalable platform. The manager emphasizes the structural growth tailwinds in wealth management driven by increasing numbers of families with investable assets. Ameriprise's competitive advantage lies in being a pure-play advisor versus bank-owned competitors, offering higher margins and less capital intensity. The company demonstrates strong capital allocation discipline, returning 85% of operating cash flow to shareholders over the past decade. Financial metrics are compelling with 20% annualized free cash flow per share growth and 11% dividend growth over ten years. At a forward P/E of just over 11x with nearly 25% ROIC, the manager sees this as a classic "quality at a reasonable price" opportunity in a compounding business model.

Pitch Summary:
Canadian National Railway operates an 18,600-mile transcontinental rail network spanning Canada and the U.S. Like other Class I railroads, CNI benefits from massive economies of scale, NIMBY restrictions, and a century of supply rationalization that make new competitive rail construction impossible. Deregulation and consolidation flipped pricing trends from decades of real declines to two decades of steady real increases. Railroads’ superior energy and labor efficiency versus trucking make them dominant on long-distance freight routes. CNI is favored over U.S. rails due to faster long-term volume potential, less coal exposure, and lower regulatory risk in Canada, where oligopolies are more accepted.

BSD Analysis:
Canadian National Railway is essentially the textbook example of what happens when a critical piece of national infrastructure becomes an entrenched oligopoly with no realistic threat of new entrants. Its 18,600-mile transcontinental network gives it scale advantages that trucking and regional rail simply cannot match, especially on long-haul freight where energy and labor efficiency tilt overwhelmingly in rail’s favor. The industry’s century-long consolidation and the political impossibility of laying new track mean CNI’s competitive moat is less a “moat” and more a fortified wall. Since deregulation, pricing power has steadily improved, reversing decades of real price declines and creating a multi-decade backdrop of rising yields and disciplined capacity management. CNI stands out among North American rails because it has better long-term volume potential, less dependence on shrinking coal freight, and a more predictable regulatory environment. Canada simply tolerates concentrated rail power in a way the U.S. does not, giving CNI more room to operate without headline risk. As supply chains grow more complex and shippers demand reliability over brute speed, CNI’s network strength and structural advantages keep it positioned as a long-duration compounder in an industry built for incumbents.

Pitch Summary:
Driven Brands is the largest automotive services platform in North America with more than five thousand corporate owned and franchised store locations operating across quick serve oil change, maintenance and repair, collision, paint, auto glass, auto parts distribution, and car wash. The group serves more than seventy million vehicles annually and owns several of the most recognized brands in the industry, including Meineke, Take 5 Oil Change, Maaco, and Carstar. Over the past decade, Driven Brands has expanded its location count by more than threefold, grown its system-wide sales by more than sixfold, and increased profits by nearly fifteenfold. The group is majority owned by Roark Capital, a leading private equity investor in franchise business models, and has been led by Jonathan Fitzpatrick, CEO, since 2012. Fitzpatrick personally owns more than $30 million of Driven Brands common stock and the vast majority of his and his management team's compensation is tethered to generating long-term shareholder value. The automotive care industry in the United States is large, growing, and highly fragmented. In aggregate, the total addressable market is estimated to be $350+ billion and encompasses a wide range of services, including automotive repair and maintenance, heavy collision repair, paint, auto glass, and car wash. There is a steadily growing car parc of 285 million vehicles in the U.S., which travel in excess of three trillion miles annually, and the automotive care industry plays a role in keeping this essential transportation infrastructure operating. The industry has proven to be recession-resistant and has a long track record of consistent growth, having grown at four percent per annum since 2007. In addition, several structural tailwinds will continue to drive predictable long-term industry growth. The number of vehicles in operation, average vehicle age, and vehicle complexity are all increasing, which in turn drives growth in demand for vehicle maintenance and cost of repair. Moreover, the continued shift in consumer preference toward do-it-for-me (DIFM) versus do-it-yourself (DIY) has increased the market for professional services. With respect to the competitive landscape, the automotive care industry in effectively every sub-segment remains highly fragmented. For instance, roughly eighty percent of auto service locations are comprised of smaller chains and independent shops, which provides scaled multi-site operators (MSOs) significant whitespace for organic and inorganic growth. This bodes well for Driven Brands, as it has the ability to invest in the required technology, infrastructure, and equipment to service more complex cars, and receives preference from insurance carriers and fleet operators who wish to work with nationally scaled and recognized chains. Take 5 Oil Change is Driven Brands' marquee asset. The business was founded in 1984 and operates in the stay-in-your-car, quick serve oil change market. In the United States, there are approximately 470 million oil changes that happen annually in the DIFM segment, and quick serve oil change models have been rapidly gaining share. Broadly, quick serve models account for one hundred million oil changes per annum, or approximately twenty percent of the market. Of this, Take 5 accounts for twelve million oil changes per annum, making it the third largest quick serve operator behind Valvoline and Jiffy Lube and the fastest growing company in the segment. The business has grown from only sixty-five units when Driven Brands acquired the company in 2016, to now having over one thousand locations nationwide. Until recently, these locations have been primarily corporate owned, which has made Take 5 an outsized financial contributor to the Driven Brands platform relative to their other highly franchised verticals. Driven Brands expects to double the location count to two thousand Take 5 units over the next five years, which is underpinned by exceptional new location cash-on-cash returns. According to the 2023 franchise disclosure document, an average Take 5 Oil Change location has a natural sales ramp period of three years, over which time a location will scale from approximately $850 thousand in revenue in year one to $1.5 million in revenue in year three. In the first year of operation, on a sales base that is only slightly more than half of mature location revenues, a Take 5 Oil Change will reach twenty percent 4-wall EBITDA margins. As the location matures, 4-wall EBITDA margins approach thirty percent. Consider the figures above, which detail the representative income statement from all Take 5 Oil Change franchisees in operation for more than twelve months. These units are on average two and a half years old and show sales of $1.36 million and twenty-seven percent 4-wall EBITDA margins, or $368 thousand in store level EBITDA. The average investment to open a new location is $1.1 million, and so a typical franchisee, after having recouped nearly forty percent of their investment within the first two years of operation, would be headed into year three generating in excess of thirty percent cash-on-cash returns. This is highly attractive to potential franchisees given Take 5's seventeen year track record of consecutive annual same store sales growth. For corporate owned locations, we add back the seven percent royalty and another four percent of incremental franchisee operating expenses to arrive at thirty-eight percent 4-wall EBITDA margins, or approximately $500 thousand in store level EBITDA. Against an identical investment cost of $1.1 million, the result is that Driven Brands is building new corporate owned Take 5 locations at a forty-five percent cash-on-cash return. However, in practice the results are even better. Instead of building new construction on a ground lease, Driven Brands will often purchase the real estate for a location outright and subsequently finance ninety percent of the capital expenditure back out in a sale and leaseback transaction. For example, Driven Brands will spend an additional $700 thousand to acquire the land up front, increasing the total land and construction cost to $1.8 million, and will later enter into a $1.6 million sale and leaseback transaction once the unit is in operation. At a seven percent cap rate, this would add approximately thirty thousand in annual occupancy costs; however, the net capital outlay drops to only $200 thousand. Therefore, on locations where it is able to purchase the real estate, Driven Brands is generating in excess of two hundred percent cash-on-cash returns on new build corporate owned Take 5 locations. On August 2nd 2023, Driven Brands' share price fell more than forty percent in a single day as the company announced headwinds in its U.S. car wash business, integration delays in its U.S. auto glass business, and the need, as a result, to adjust guidance down for the year. The company revised EBITDA guidance down by nine percent, or $55 million, and the shares lost $1.8 billion in market capitalization. However, not all news was negative. In the same report, the maintenance segment, which principally consists of Take 5 Oil Change and is the size of all the other segments combined, announced nearly forty percent EBITDA growth and double-digit same store sales growth. Likewise, the collision segment reported double-digit growth, and Driven Brands reiterated its confidence in achieving its five year plan of $850 million in EBITDA by 2026. And so, while nine of the company's eleven automotive brands were unaffected, at the new $2.4 billion market capitalization and 9x EV/EBITDA multiple, Driven Brands was now valued at a forty percent discount to peer automotive retailers and a fifty percent discount, with double the growth, versus other highly franchised retail concepts. Consider the base case scenario modeled below, which indicates a value of $39.89 per share, or approximately 179 percent upside to intrinsic value based on the year end share price of $14.26. This forecast models relatively little contribution from the U.S. carwash segment, shows the auto glass segment scaling slower than company expectations, includes no acquisition activity, and has management opting to paydown low cost debt over highly accretive share repurchases. Even still, Driven Brands is expected to ramp to over $600 million in free cash flow in five years' time, after which point the company would be growing mid-teens from embedded growth and deleveraging.

BSD Analysis:
The manager presents a compelling deep-value thesis on Driven Brands, arguing the market has overreacted to temporary operational challenges in two segments while ignoring the strength of the core Take 5 Oil Change business. The investment case centers on exceptional unit economics, with new Take 5 locations generating 45% cash-on-cash returns (or 200%+ when using sale-leaseback financing), supported by a 17-year track record of same-store sales growth. The franchise model provides capital-light expansion with embedded earnings growth as newer locations mature and royalty rates increase from 1% to 7% over three years. Despite concerns about electric vehicle adoption, the manager argues ICE vehicles will remain dominant for 15+ years, particularly in Take 5's core markets. The valuation appears compelling at 9x EV/EBITDA following a 40% single-day decline, representing significant discounts to automotive retail peers despite superior growth prospects. With $2.6 billion in mostly fixed-rate debt at 4.3% and strong free cash flow generation, the company can simultaneously grow earnings 20%+ annually while deleveraging, creating multiple paths to value realization.

Pitch Summary:
Nextage presents an attractive investment opportunity due to its unique position in the Japanese used car market, which is characterized by repeat customer interactions due to mandatory safety checks. Despite recent negative media coverage and internal misconduct issues, the company's fundamentals remain strong. The return of the founder as CEO and the continued support from banks highlight confidence in Nextage's recovery and growth potential. The company's strategy of expanding large-size stores and focusing on lifetime customer transactions is expected to drive significant earnings growth. With a target price range of Y3,000 to Y3,540, the stock is poised for a 30-50% increase over the next twelve months, supported by a projected 20% annual earnings growth.

BSD Analysis:
Nextage's ability to differentiate itself from competitors like Big Motor and Idom lies in its strategic focus on large-format stores and direct consumer interactions. The company's decision to eliminate sales incentives and adopt a team-based approach aims to enhance customer experience and employee retention, potentially stabilizing add-on sales. The used car market in Japan is fragmented, but Nextage's strong capital position allows it to aggressively expand its store network, capturing market share. The company's historical commitment to its strategy and the founder's leadership provide a solid foundation for future growth. However, investors should monitor the stabilization of add-on sales and the company's ability to meet its revised EBIT targets.

Pitch Summary:
A recent example would be Aritzia, which despite contributing positively in the fourth quarter was a material detractor over the year. In early 2023 we wrote about the importance of investing as an owner, and discussed the headwinds Aritzia was facing as it spent on infrastructure to support the significant growth it had seen the past few years. Unfortunately, there were additional setbacks that the business announced in May 2023. Aritzia had started to see market share losses due to a lack of innovation, which in combination with declining consumer confidence, led to the share price declining 40% in the year. Many of you would have heard us explain how we diligence the people separate from the business, and Aritzia is no exception. As investors with an ownership mindset, we spend a lot of time building relationships with management teams in both good times and bad in order to better inform our decision making. Aritzia’s management had been catching up on necessary investments following a period of exceptional growth, with its U.S. and eCommerce businesses more than tripling since the onset of the pandemic. For context, it took Aritzia 35 years to reach $1 billion in sales in North America, but less than 3 years to add an incremental $1 billion in sales! Aritzia historically has been disciplined in its growth journey and a very good steward of capital ($3.7B market capitalization and $1.6B of capital invested). Looking forward, we are confident that Aritzia is set to get back to doing more of the same. With the bulk of its investments approaching the rear-view mirror, profitability and cash flow is set to recover and inventory levels have recently normalized to healthier levels. As we discussed in early 2023, we invest like owners, and we view Aritzia’s investments constructively as they provide the business with a strong foundation to continue to build upon in the years to come. While Aritzia was a material detractor to performance, it is exactly the opportunity we seek to capitalize on as long-term investors.

BSD Analysis:
The company has spent heavily on distribution, systems and U.S. growth, depressing near-term earnings but positioning the brand for structurally higher sales and margins once investment normalizes. On current estimates the shares trade on a mid-20s forward P/E and high-teens EV/EBITDA for a business that consensus expects to grow revenue at a mid-teens pace over the medium term, with significant operating leverage as new stores ramp and e-commerce scales. Management and insiders retain meaningful equity exposure and have been disciplined historically on capital allocation, favouring organic growth over dilutive deals. We see catalysts from margin recovery as inventory normalizes, continued U.S. store openings, and potential multiple re-rating as execution improves and investors gain confidence that recent market share losses were transient. Overall we view Aritzia as a high-quality, vertically integrated apparel retailer with an attractive runway in the U.S. and a temporarily depressed earnings base.

Pitch Summary:
The store-wide health crisis is coming: the company is only focused on store growth at the expense of the health requirements at current stores (declining health standards, food safety issues, Update 2/6 - Follow-up report: Food illness outbreak is inevitable.

BSD Analysis:
CAVA is executing a fast-casual rollout with strong AUVs, digital mix, and four-wall margins, but the model is at a prove-it phase on national scale. Peak unit economics from early markets may step down as new geographies open with higher build costs, longer ramp, and tighter labor. Commodity exposure (produce, oils, proteins—especially lamb) can swing COGS, and traffic is sensitive to price after several rounds of menu increases. Throughput hinges on ops discipline and maintaining freshness at volume. Valuation assumes sustained high-teens unit growth and stable restaurant-level margins; any deterioration in comps or new-unit returns hits the DCF hard.

Pitch Summary:
Deceptive ads; 20% of the sales is spent on marketing; slowing market penetration; series of accounting problems; top holders are from HK and insiders are cashing out;

BSD Analysis:
Celsius is a high-growth energy drink brand riding distribution leverage from its PepsiCo partnership. The engine is velocity gains in convenience/grocery and rapid shelf expansion, but the setup is exposed to category normalization after a multi-year boom. Gross margins benefited from price/mix and scale, yet promo intensity is creeping up as Red Bull, Monster, and newer entrants defend space. International is early and cost-heavy; trial needs sustained repeat to justify slotting and media. Litigation/claims risk around “thermogenic” marketing is a lingering overhang, and the working-capital cycle tightens as inventory builds for new doors. Equity embeds years of double-digit share gains; any slowdown in scanner data or higher trade spend can knock the multiple hard.

Pitch Summary:
For-profit university with fast and loose admissions to take advantage of federal student loan disbursements; enrollment trends in multi-year decline; upcoming regulations; graduation rates are below average; $1.5 bil acquisition should be written off;

BSD Analysis:
Adtalem operates healthcare-focused universities. The bear case points to dependence on Title IV funding, aggressive recruiting, and high tuition. Enrollment growth is uneven, and regulatory scrutiny is a constant risk. Acquisitions add goodwill and integration concerns. Downside if enrollment dips or oversight tightens.

Pitch Summary:
Bijou Brigitte modische Accessoires AG (BIJ) is a Germany-based omni-channel retailer that operates in the fashion jewelry and accessories space. BIJ manufactures, imports, and distributes fashion jewelry, fashion accessories and complementary products. These are sold directly to consumers mainly via its own store network (c. 900) across Europe at affordable price points as well as to a smaller degree online and via concessions. BIJ serves mostly female customers by providing a trusted and low-cost solution for short-term needs for fashion jewelry and accessories. BIJ is a small cap company, listed on the Frankfurt Stock Exchange with a market capitalization of c. EUR 300m at the time of our initial investment. The free float market cap is significantly lower at EUR 150m as the founding family holds slightly north of 50% of the shares (liquidity is quite low). Only one research institution covers the stock and management is usually only available for investors via the AGM. Despite that, and thanks to a long-standing and trusted broking relationship, we finally managed to meet the CFO in person in Hamburg in November last year, where we interviewed him around outstanding parts of our initial investment thesis. The company's balance sheet is an absolute fortress with zero bank/bond liabilities and c. EUR 170m in net cash by FYE2023e. Although, we estimate that roughly EUR 80-100m of it is trapped and therefore not available for distribution to shareholders. We understand that management views it as a buffer against challenging circumstances. Due to the conservative nature of this policy, BIJ comfortably survived Covid without the need for any outside capital from investors or banks. This leaves BIJ with a distributable cash balance of FYE2023e EUR 67m (EUR 8.70 per share), roughly equal to 22% of the market capitalization. We certainly view this policy as too conservative and would advocate for even higher potential distributions to shareholders. On the other hand, we would rather have it this way than the other way around, especially in such a competitive industry. BIJ has quite an impressive and long-term track record of distributing cash to shareholders via dividends as well as buybacks and we are convinced this will continue for the foreseeable future. The pay-out ratio, which has been at an average of 92% since 2007 (according to our numbers and excluding Covid-years) is expected to remain generous. We believe that the founding family views this business as a cash cow within their broader portfolio of assets and will continue to milk it. Buybacks are an option for management and have been executed in the past, but we would be surprised if anything was announced in the short term. The dividend policy provides a base dividend of EUR 3.00 per share (7.7% yield) with an estimated upside potential from additional distributions closer to or above 10%. Past economic crises indicate that the business is very resilient during downturns. We believe a key advantage, compared to more cyclical mid- or higher end jewelry, is the relatively low and affordable price point that BIJ offers across its product portfolio. Further, BIJ has proven that it can pass along price increases to customers and is therefore holding up well against inflation. We expect BIJ to deliver a flat margin year-over-year despite several headwinds such as higher raw material, transport, and electricity prices as well as wage increases. Further, we understand that price increases have not impacted customers' demand for the products and therefore feel confident that BIJ can and will further increase prices in the future. This gives us confidence in the management's ambition to keep margins at least stable over the next couple of years. Over several cycles, BIJ has successfully maintained its competitive positioning and we believe it will at least stay well positioned. Don't get us wrong, this sector is highly competitive, barriers to entry are low and there have been several periods over the company's history with elevated levels of competition. Usually, we would stay away from a set-up like this. So why invest despite all this? We have noticed that during the period prior to Covid, and accelerated by the pandemic, some competitors have retracted and closed. Thanks to that BIJ might now enter a period of milder competition. In the past, BIJ went through several phases of higher and lower competition. Unsurprisingly, lower levels of competition meant higher margins and better returns on capital. Given the high-margin, high return on capital and highly cash-generative nature of the business, any additional growth would be very accretive. Generally, management is very cautious with regards to investments in new store openings, which we like, as there is a low risk of unfortunate capital allocations. BIJ has successfully consolidated its own store network over recent years and its expansion team sees attractive opportunities to grow in selected markets across Eastern, Southern and Western Europe over the medium term. Further, we expect growth via franchising and concessions. Inorganic growth is less likely in our view but not impossible. With our expectation for a solid FY2023, a very strong balance sheet and EPS growth going forward as well as generous dividend distributions, we are roughly paying a 2023e P/E of 7.5x (adjusted for the distributable cash excl. management's safety buffer) today. This translates into an earnings yield of c. 13%. We consider this simply too cheap for a decent quality company with a proven track record of delivery and the potential for at least stable margins supported by a more benign competitive environment. Further, we would like to highlight the, in our view, very favorable risk/reward profile of this case. We believe there is limited downside not only due to the proven resilience of the business model but also because BIJ holds a large share of their market capitalization (nearly 60%) in net cash and is generating cash continuously.

BSD Analysis:
Gehlen Bräutigam Capital presents a compelling value investment thesis for Bijou Brigitte, a German fashion jewelry retailer trading at attractive valuations. The fund highlights BIJ's fortress-like balance sheet with EUR 170 million in net cash and zero debt, providing significant downside protection in a volatile retail environment. At a 2023 P/E of 7.5x (adjusted for excess cash), the company offers a 13% earnings yield while maintaining a generous 92% historical payout ratio and 7.7% dividend yield. The managers emphasize BIJ's resilience during economic downturns due to its affordable price points and proven ability to pass through price increases without demand destruction. A key catalyst is the reduced competitive landscape post-COVID, as several competitors have closed operations, potentially leading to improved margins and market share gains. The company's conservative management approach to store expansion reduces capital allocation risks, while opportunities exist for growth in Eastern, Southern, and Western European markets through franchising and concessions. With nearly 60% of market capitalization held in net cash and continuous cash generation, the investment offers an attractive risk-adjusted return profile for patient value investors.

Pitch Summary:
Visa is the world's largest global payments network and probably needs little introduction. What is underappreciated about Visa is the long-term compounding effect of its relatively newer, smaller, but higher-growth businesses in Visa Direct and B2B/Commercial payments – and the various services that will be attached to these over time. Today, most of the market is myopically focused on Visa's large core consumer payments business, which is slowing now after a booming period fueled by fiscal stimuli and high inflation. But the longer-term contribution from Visa's newer businesses will likely be more than the market currently expects due to the compounding effect of their relatively higher growth rates and very large addressable markets.

BSD Analysis:
Montaka's Visa investment focuses on underappreciated growth drivers beyond the company's dominant consumer payments franchise, which currently faces headwinds after pandemic-era stimulus benefits fade. The fund emphasizes that while markets are myopically focused on near-term consumer payment slowdowns, they're missing the long-term compounding potential of Visa's newer, higher-growth business segments. Specifically, Visa Direct and B2B/Commercial payments represent smaller but faster-growing revenue streams with very large addressable markets that should contribute meaningfully over time. The manager believes these emerging businesses will compound at higher rates than the core franchise, creating additional value that current valuations don't reflect. This represents a classic time horizon arbitrage where short-term earnings concerns mask longer-term structural growth opportunities. Visa's network effects and switching costs provide defensive moats while the newer business lines offer offensive growth potential. The investment thesis relies on the market underestimating the contribution from these higher-growth segments as they scale and mature.

Pitch Summary:
S&P Global owns some of the world's largest and most valuable financial datasets and has built several important businesses on top of these advantages. One of its most valuable is its Ratings business which provides credit ratings for the world's fixed income securities. Of course, this business won big from the significant bond issuance that happened when interest rates were very low during the pandemic – and demand was pulled forward. But when rates started to rise, S&P Global experienced an 'air pocket' and demand temporarily evaporated. But while Ratings earnings are currently depressed, the market is not adequately reflecting the large earnings uptick that will materialize over the coming years. Substantially all of the bonds issued over the last three years need to be refinanced. The demand for S&P's ratings is simply pent-up. It is coming. Indeed, between now and 2026, S&P Global expects that US$8 trillion in refinancings that will need ratings.

BSD Analysis:
Montaka's S&P Global investment capitalizes on a cyclical trough in the company's core Ratings business, which the fund views as a mission-critical financial services platform with significant pent-up demand. The manager explains that S&P benefited enormously from pandemic-era bond issuance when rates were low, but faced an earnings air pocket as rising rates temporarily eliminated new issuance demand. However, the fund identifies a powerful catalyst: substantially all bonds issued during the low-rate period must be refinanced, creating $8 trillion in refinancing needs through 2026. This represents massive pent-up demand for S&P's essential credit rating services that the market is underestimating. The investment thesis relies on S&P's oligopolistic position in credit ratings, where regulatory requirements and client relationships create high switching costs and barriers to entry. Montaka believes current depressed earnings don't reflect the inevitable uptick from refinancing activity, creating a time horizon arbitrage opportunity. The company's valuable financial datasets and diversified business model provide additional defensive characteristics beyond the cyclical Ratings recovery.