Investment Pitches

Pitch Summary:
This happened in October when global luxury powerhouse, LVMH, experienced a stock price decline of nearly 30% from its peak several months prior. We have studied this business in detail over the years and were patiently waiting for a stock price attractive enough for investment. We took the opportunity to sell The Carlyle Group to fund this new investment. LVMH owns several of the world's most prestigious and well-nurtured luxury brands, including Christian Dior and the 170 year-old Louis Vuitton. In a world in which the wealthy continue to grow wealthier, LVMH's best customers have an extraordinary ability to pay almost any price for the world's most luxurious goods. Price increases – even substantial ones – are not questioned, or even noticed, by these customers. And indeed, higher prices only serve to increase the cachet and exclusivity of these brands. As a result, long-term revenue growth will likely continue to be driven by price increases to an unusually large degree. Such a strong contribution to growth from pricing has important profit margin implications for LVMH. It means that long-term profit margins will probably end up at levels far greater than those being expected by the market today. And this is one of the important reasons we believe this extraordinary business is undervalued today.

BSD Analysis:
Montaka initiated a position in LVMH after a 30% stock decline from peak levels, viewing the pullback as an attractive entry point for a business they had studied extensively. The fund's thesis centers on LVMH's pricing power advantage, driven by its ownership of prestigious luxury brands like Christian Dior and Louis Vuitton that cater to ultra-wealthy customers who are price-insensitive. The manager argues that price increases actually enhance brand exclusivity and cachet, creating a virtuous cycle where higher prices drive both revenue growth and margin expansion. This pricing dynamic is particularly powerful as it allows LVMH to grow revenues substantially through price rather than volume, which has significant margin implications. The fund believes the market is underestimating LVMH's long-term profit margin potential, creating an undervaluation opportunity. The investment represents a classic luxury consumer play benefiting from wealth concentration trends and the unique economics of ultra-premium brands. Montaka funded this position by selling The Carlyle Group, indicating confidence in LVMH's superior long-term prospects.

Pitch Summary:
Last quarter we talked about a new idea: McCoy Global Inc. (MCB.TO). This is an interesting company in that it is cheap, growing and has pivoted in terms of business strategy in recent years. All of this combined with what we think are some (understandable) market misunderstandings about the business. The company manufactures, develops and researches hydrocarbon drilling technology and has historically been primarily a manufacturer of drilling equipment with a focus on quality engineering. It has pivoted over the last several years towards technology innovations that can assist with the automation of drilling processes, removing people from what is called the "red zone" the most dangerous area of an oil rig near the drilling equipment itself. The company aims to reduce what might take a team of 8 staff in the red zone, down to 2-3 and ultimately automate many processes that require manual, physical intervention. This will save lives and reduce accidents. We will talk more about McCoy this year, because we think they have a very interesting business model, are smaller than many competitors and have a lot of growth ahead of them. The management has also exercised excellent capital allocation for the business, buying back 5% of stock in the last 6 months as well as having a history of smaller strategic acquisitions that have added huge value to the company, both in terms of financials and in terms of their long-term business plan. One example of this was their purchase of 3PS in 2017. They purchased this company, which enhanced their sensor technology to be used in drilling equipment, for US$6.1 million. This purchase included land and production facilities along with the business. Partly due to accretion in value of these assets in subsequent years they were able to sell the facility and leaseback for more than $6.5 million. This essentially made the purchase a net gain to the company financially as well as adding value to the business.

BSD Analysis:
The manager presents McCoy Global as an undervalued growth story benefiting from a strategic pivot toward drilling automation technology. The company is transitioning from traditional equipment manufacturing to high-value automation solutions that reduce workforce requirements in dangerous "red zone" areas from 8 staff to 2-3. This safety-focused automation addresses a critical industry need while creating recurring revenue opportunities. Management demonstrates excellent capital allocation through strategic acquisitions like the 3PS purchase, which generated immediate returns while adding valuable sensor technology capabilities. Recent 5% share buybacks signal management confidence and shareholder-friendly policies. The company's smaller size relative to competitors provides agility and growth potential in the expanding drilling automation market. Market misunderstanding of the business transformation creates an attractive entry point for a fundamentally improving franchise with significant runway for expansion.

Pitch Summary:
Starting off with the ECIP banks as mentioned above, particularly Citizens Bancshares (CZBS) and M&F Bancorp (MFBP), these have particular business benefits irrespective of what the rate cycle pans out to do this year. As mentioned in previous letters these have issued ECIP preferred stock which they can now leverage onto their balance sheet (with this stock counting as AT1 capital and giving preferential capital treatment). This growth is still playing out and will likely take many years to come to full fruition. In essence both these banks (along with many of the other ECIPs) are in the process of doubling in size. Their balance sheets will double, deposits will increase, and loan books will grow. This, as many reading this will already know, is because the program was set up to encourage the Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) to grow and help their communities. Against this backdrop, and partly because of the fear induced in the US banking market earlier last year, they have become cheaper than they were in early March of 2023 (particularly in the case of MFBP). Both are priced at around 5x, although there will be an update at the end of January from the FFIEC report filings. So, these banks are cheaper than they should be (compared to any other non-ECIP bank), have growth ahead of them, and extremely high capital adequacy levels.

BSD Analysis:
The manager highlights M&F Bancorp as an attractive ECIP bank investment with similar structural advantages to Citizens Bancshares. The company benefits from ECIP preferred stock that counts as AT1 capital, enabling significant balance sheet expansion and loan book growth. Trading at approximately 5x earnings, MFBP appears particularly undervalued following 2023 banking sector volatility. The CDFI/MDI status provides a competitive moat in serving minority and underserved communities with government support for growth initiatives. The multi-year growth trajectory from doubling balance sheet size should drive substantial earnings expansion. High capital adequacy levels provide downside protection while the ECIP program creates sustainable competitive advantages. Market dislocation has created an opportunistic entry point for a fundamentally strong franchise. The combination of cheap valuation, structural growth drivers, and strong capital position makes MFBP an attractive long-term investment.

Pitch Summary:
Starting off with the ECIP banks as mentioned above, particularly Citizens Bancshares (CZBS) and M&F Bancorp (MFBP), these have particular business benefits irrespective of what the rate cycle pans out to do this year. As mentioned in previous letters these have issued ECIP preferred stock which they can now leverage onto their balance sheet (with this stock counting as AT1 capital and giving preferential capital treatment). This growth is still playing out and will likely take many years to come to full fruition. In essence both these banks (along with many of the other ECIPs) are in the process of doubling in size. Their balance sheets will double, deposits will increase, and loan books will grow. This, as many reading this will already know, is because the program was set up to encourage the Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) to grow and help their communities. Against this backdrop, and partly because of the fear induced in the US banking market earlier last year, they have become cheaper than they were in early March of 2023 (particularly in the case of MFBP). Both are priced at around 5x, although there will be an update at the end of January from the FFIEC report filings. So, these banks are cheaper than they should be (compared to any other non-ECIP bank), have growth ahead of them, and extremely high capital adequacy levels. For example, CZBS reported that its CET1 ratio at the end of Q3 was 19%, and total risk-based capital ratio was 20%.

BSD Analysis:
The manager presents a compelling bull case for Citizens Bancshares based on its participation in the ECIP program, which provides unique growth opportunities through preferential capital treatment. The bank is positioned to double in size as it leverages ECIP preferred stock as AT1 capital, driving expansion in deposits and loan books. Trading at approximately 5x earnings, CZBS appears undervalued relative to non-ECIP banks despite superior growth prospects. The exceptionally strong capital position with a 19% CET1 ratio and 20% total risk-based capital ratio provides significant downside protection. The CDFI/MDI designation creates a structural competitive advantage in serving underserved communities. Market fears from 2023 banking sector stress have created an attractive entry point. The multi-year growth trajectory from the ECIP program should drive sustained outperformance as the business model scales.

Pitch Summary:
For 2023, VST was our largest position and our best performer (69% total return). Finally, after a few years our investment thesis has started to play out. We believe there were several reasons for VST's outperformance. First, electricity prices and forward curves were elevated during the first three quarters of the year, which resulted in positive financial updates and guidance over the short to mid-term. Second, the acquisition of Energy Harbor (ENGH) announced in March was viewed favorably given the nuclear capacity additions the transaction brings. Third, higher margins, less competition, and customer retention has resulted in increased profitability in the oft maligned retail segment; and management teams throughout the sector believe this trend is sustainable. And finally, a paradigm shift has started to occur in terms of how investors think about the terminal value of power generation assets. Despite the significant gain in VST's share price last year, we continue to believe that the current equity value trades at a large discount to intrinsic value. Our conviction in this mispricing is partly based on our view that the terminal value of VST's asset portfolio is significantly higher than the market gives credit. Why else would a stable, yet growing business still have a cost of equity in excess of 20%? Terminal value has consistently been one of the biggest valuation concerns for deregulated power companies, and that's largely a byproduct of society's desire to eliminate any form of power generation that produces carbon emissions or radioactive waste. Units 3 and 4 of the Vogtle nuclear power plant, owned by Southern Company (SO), started construction in 2013. The estimated cost to complete both units (2.2GWs total) was $14 billion. In July 2023, after years of design delays, cost overruns, bankruptcy, lawsuits, and a regulatory standoff, Vogtle Unit 3 finally began producing power (Unit 4 is expected to come online in early 2024). The total cost of the first nuclear reactors to be completed in the US in more than 30 years is now expected to be at least $34 billion ($34B / 2,200 MW = $15.45M per MW). A few months prior to the start-up of Unit 3, VST announced that it would pay ~$4.5 billion to acquire Energy Harbor, an independent power generator with an asset portfolio that includes 4GW of nuclear ($4.5B / 4,048 MW = $1.1M per MW, which is a 93% discount to Vogtle). Even after accounting for significant depreciation for the nuclear plants and adding in the rest of the asset portfolio, it looks like VST got a smoking hot deal. And in contrast to Germany, the US is currently experiencing something akin to a nuclear energy revival. 2024 will mark the beginning of federal financial support for nuclear power via the nuclear production tax credit (PTC). The nuclear PTC, which was enshrined in the Inflation Reduction Act (IRA), was one of many financial incentives meant to spur the US further along the 'energy transition' path. While slightly complex to calculate, the PTC ensures that electricity generated from merchant nuclear facilities will earn up to $15/MWh when the market price of electricity falls below a predefined threshold. This may not seem like much, but the cash flow uplift for VST/ENGH could be an incremental $750M (~17% of pro forma EBITDA). It should also be noted that the nuclear PTC is indexed to inflation, which obviously supports VST's growth outlook without investing any growth capital. Constellation Energy (CEG), the largest nuclear generator in the US, offers another good readthrough as to how meaningfully accretive this transaction could be for VST. Over the last 12 months, CEG raised EBITDA guidance twice, from an initial midpoint of $3.4B to $4.2B (a 24% increase). Going back to why we still believe VST is undervalued, a more direct comparison with CEG is warranted. Allow us to use CEG management's preferred way of describing the company, which is that they are the largest producer of carbon free electricity in the US. CEG owns and operates 21GW of nuclear generation, 9GW of gas/oil generation, and a retail segment. A business mix not too dissimilar from VST, but the valuation similarities are stark. CEG generates less EBITDA and less free cash flow than VST (even before factoring in the ENGH acquisition) but has an enterprise value nearly 70% higher than VST, and a market cap 166% higher. Based on the pro forma guidance for VST/ENGH, the business is currently valued at 5.8x EBITDA (vs. CEG at 11x) and a FCF yield of 20% (vs. CEG at 8%). This begs the question, is CEG simply overvalued? Certainly not if valued by the replacement cost of their assets. Using Vogtle's cost as a reference, the replacement cost for CEG's nuclear generation portfolio alone points to an enterprise value of ~$325B (more than 600% higher than its current EV). But even if one were to apply the nosebleed multiples of the 'magnificent seven' (21x EV/EBITDA, 2.5% FCF yield, and 37x P/E), the upside in CEG equity would still be greater than 200% (also worth noting that CEG grew cash flows 33% last year while the 'mag seven' grew by 17%). The point being, if CEG looks cheap, VST looks like a steal! So why then is there such a large valuation gap between CEG and VST? We think this is primarily due to investor appetite for carbon-free energy and how CEG's management frames the investment case. The effort to cut emissions is necessary, but recent energy security and reliability crises suggest to us that a balance between idealism and pragmatism is returning to the market. VST was a major beneficiary from power scarcity events in 2023, which allowed the company to not only beat and raise guidance this year, but also provide 2024 guidance that was far above what the market expected. If there's one thing we've learned from economics, it's that when high demand meets low supply, higher prices follow. If we can finally sidestep the terminal value question for power producers, we might sensibly begin considering the replacement value of assets owned by companies like VST/ENGH (total generation capacity of 42GW = $27B enterprise value; total capacity of Vogtle Units 3 & 4 is 2.2GW = Price tag $34B). We're still waiting for at least some of that value to be realized, which is why VST remains our largest position.

BSD Analysis:
Legacy Ridge Capital presents a compelling bull case for Vistra Corp, emphasizing the company's significant undervaluation relative to intrinsic worth and peer comparisons. The managers highlight VST's 69% return in 2023 as validation of their thesis, driven by elevated electricity prices, the accretive Energy Harbor acquisition adding 4GW of nuclear capacity at a 93% discount to replacement cost, and improving retail segment profitability. The nuclear production tax credit from the Inflation Reduction Act provides an additional $750M annual cash flow uplift (~17% of pro forma EBITDA), while the business trades at just 5.8x EBITDA versus peer Constellation Energy at 11x despite generating higher cash flows. The managers argue that changing perceptions around energy security and grid reliability are creating a paradigm shift that should close the valuation gap. With VST trading at a 20% free cash flow yield and benefiting from power scarcity events, the fund views the stock as significantly undervalued relative to its $27B enterprise value compared to replacement costs. This remains their largest position as they await value realization.

Pitch Summary:
Donnelley Financial Solutions (DFIN) Donnelley Financial Solutions (DFIN) is a market leader providing compliance, regulatory, and transaction-related solutions to corporations and investment companies. It operates two main segments: Capital Markets (68% of TTM revenue) - Services include IPO filings, M&A support, and ongoing compliance solutions. Investment Companies (32% of TTM revenue) – Aids investment management firms (mutual funds, ETFs, and alternative investments) with ongoing regulatory filing requirements. Unlike competitors offering only partial services, DFIN stands out as an end-to-end provider with solutions encompassing a business's lifecycle. Thesis 1. Recurring Revenue Growth - Software solutions account for $322m in TTM revenue and are experiencing rapid growth with high incremental margins. Management projects mid-teens growth for this segment, supported by improvements in retention (Gross Retention Rate increased from 89% in Q1 2024 to 93% in Q3 2024). 2. Event-Driven Business Recovery - Transactional revenue tied to M&A and IPOs (~25% of TTM revenue) will benefit from improving activity levels. 3. First-Mover Advantage in Regulatory Solutions - DFIN's Tailored Shareholder Reports (TSR) platform is expected to generate $11m-$12m in annual recurring revenue, capitalizing on new SEC mandates. 4. Strong Competitive Position - Leading SEC filing agent for funds and corporations. Despite industry headwinds, growing market share in the Virtual Data Room (Venue) segment. 5. Management Alignment - Executive incentives are tied to software sales growth and EBITDA margins, aligning with shareholder interests. Why the Opportunity Exists 1. Stock Overhang - Director Jeffrey Jacobowitz, previously a 7.7% shareholder, has significantly reduced his stake, creating near-term selling pressure and suppressing the stock price. 2. Transition Challenges - The shift from transactional to subscription models has temporarily increased churn and subdued growth metrics. 3. Market Skepticism - Weak IPO and M&A activity has overshadowed the company's transition to higher-margin recurring revenue streams. Valuation The current valuation reflects skepticism about DFIN's ability to achieve software growth targets. The stock is undervalued as margins expand and revenue growth accelerates. A successful strategy execution could result in $7+ EPS by 2027, supporting a $140+ stock price at a 20x multiple. Catalysts 1. Completion of the share overhang from Jacobowitz's sell-down. 2. Recovery in M&A and IPO activity. 3. Continued improvement in key metrics such as ARR and retention rates. 4. Enhanced investor confidence through earnings outperformance. Risks 1. Execution Risk—Failure to achieve software sales growth. The new administration's reduced regulatory burden could result in less filing activity. 2. Market Dependency - Prolonged weakness in IPO and M&A volumes could delay transactional revenue recovery. 3. Insider Selling - Jacobowitz's continued sell-down may suggest internal concerns or limit near-term stock appreciation.

BSD Analysis:
The manager presents a compelling transformation story for Donnelley Financial Solutions, highlighting the company's transition from transactional to recurring revenue streams with software solutions growing at mid-teens rates. The investment thesis centers on DFIN's market-leading position as an end-to-end provider of compliance and regulatory solutions, with improving retention rates (89% to 93% gross retention) and $322M in software revenue showing strong momentum. The manager identifies a significant opportunity in the company's first-mover advantage with Tailored Shareholder Reports, expected to generate $11-12M in annual recurring revenue from new SEC mandates. Current weakness is attributed to temporary selling pressure from director Jeffrey Jacobowitz reducing his 7.7% stake, creating an attractive entry point. The valuation case projects $7+ EPS by 2027 supporting a $140+ stock price at 20x multiple, representing substantial upside from current levels. Key catalysts include completion of the share overhang, M&A/IPO market recovery, and continued improvement in software metrics, while the business benefits from aligned management incentives tied to software growth and margin expansion.

Pitch Summary:
Beyond Inc (BYON) Beyond operates as an asset-light e-commerce company, owning and managing a portfolio of retail brands such as Overstock, Bed Bath & Beyond, Baby & Beyond, and Zulily. With a high EBITDA-to-free-cash-flow (FCF) conversion and low capital requirements, it is positioned to scale efficiently. Recent acquisitions, including Bed Bath & Beyond (2023) and Zulily (2024), have expanded their reach while revealing management missteps and growing pains related to brand integration and operational execution. Thesis 1. Leadership and Vision - Chairman Marcus Lemonis employs a hands-on, performance-driven leadership style. His compensation is equity-based, with options linked to significant stock price appreciation ($45, $50, and $60 strike prices). 2. Asset-Light Model - Beyond's capital-light approach minimizes fixed costs and facilitates high FCF conversion, with incremental return on invested capital (ROIC) near 100%. This positions the business for profitable growth as revenue scales. 3. Valuation Opportunity - Beyond trades at distressed levels, with a market cap of $234m and a price-to-sales ratio significantly below peers. Analyst FY25 revenue estimates of $1.49B are overly pessimistic and extrapolate recent trends, which are likely to reverse. Market share gains and a stabilizing furniture market should drive revenue above estimates, bolstered by improving customer acquisition metrics and app usage trends. 4. Strategic Partnerships - A recent $25m investment in Kirkland's offers multiple synergies: A brick-and-mortar presence for Bed Bath & Beyond through "shop-in-shops" and standalone stores (both operated by Kirkland's, as Beyond will maintain an asset-light model with no retail footprint or inventory ownership). Reduced e-commerce return costs by utilizing Kirkland's locations. Enhanced brand visibility to address consumer misconceptions regarding Bed Bath & Beyond's bankruptcy. 5. Optionality in Private Equity Investments - Beyond's investments in Tzero (blockchain-enabled securities trading) and GrainChain (digital agriculture solutions) provide mispriced optionality. Both assets are valued conservatively on the balance sheet despite positive developments such as Tzero's regulatory approvals and GrainChain's growing traction in the industry. Catalysts 1. The sale of headquarters to Salt Lake City leaves the company debt-free. 2. Continued stabilization in the furniture market alongside improved market share metrics. Why the Opportunity Exists 1. Execution Missteps - Previous leadership committed a critical error in shutting down the Overstock brand. Current leadership set overly ambitious revenue growth forecasts, reducing credibility. These issues have negatively affected investor sentiment. 2. Cash Burn Concerns - High marketing expenses and the relaunch of acquired brands have temporarily strained cash flow, raising fears of insolvency. 3. Tax Loss Selling - Beyond's stock declined ~82% in 2024 and 21.5% in December alone. Tax-loss harvesting likely resulted in excessive selling pressure as the year closed. Risks 1. Cash Burn and Profitability - The business remains unprofitable, and prolonged cash burn may force Beyond to monetize its private equity investments at less favorable valuations. Failure to achieve cost discipline or revenue growth could worsen these concerns. 2. Execution Risks - Management has a history of missteps, including poorly timed website launches and nearly investing in distressed companies like The Container Store. Ineffective marketing spending could impede customer acquisition and retention efforts. 3. Industry Dynamics - A reversal in the recent stabilization of furniture sales could adversely affect revenue growth. Competitors like Wayfair maintain a substantial lead in market share (~9%) compared to Beyond (~1%). 4. Index Removal Risk - Falling below the market cap threshold for the Russell 2000 index could heighten selling pressure, further depressing the stock price.

BSD Analysis:
The manager presents a compelling turnaround thesis for Beyond Inc, emphasizing the company's asset-light e-commerce model with high free cash flow conversion and near 100% incremental ROIC. The investment case centers on new leadership under Marcus Lemonis, whose equity-based compensation aligns with shareholder interests through options at $45-60 strike prices. The manager identifies a significant valuation opportunity with the stock trading at distressed levels despite owning valuable brands like Bed Bath & Beyond and Zulily. Strategic partnerships, particularly the $25M Kirkland's investment providing brick-and-mortar presence, offer multiple operational synergies and reduced return costs. The thesis includes mispriced optionality through investments in Tzero and GrainChain, which are conservatively valued despite positive developments. Key catalysts include debt-free status from headquarters sale and furniture market stabilization, while the manager attributes current weakness to tax-loss selling and temporary execution issues rather than fundamental deterioration.

Pitch Summary:
We sold shares of KBR, Marvell Technologies, and Schlumberger in Q4. We are still bullish on KBR and Marvell, but sized down due to portfolio constraints. SLB is a company we’ve liked for a long time and continue to believe it is the strongest player in oil field services. However, we believe the outlook for oil prices is not supportive of higher prices for the stock in the near term, given: • OPEC+’s call for cuts of an additional million barrels a day are voluntary. • U.S. Energy Information Administration reported that U.S. crude and condensate production increased to 13.24 million barrels a day in September.

BSD Analysis:
SLB, formerly Schlumberger, enters 2026 as a redefined technology-driven energy solutions company following the successful integration of ChampionX. The firm has guided for 2026 revenue between $36.9 billion and $37.7 billion, with adjusted EBITDA expected to hit a range of $8.6 billion to $9.1 billion. Management is prioritizing the recovery of international markets, specifically predicting a rebound in Middle Eastern rig counts and a surge in Latin American offshore activity. A standout catalyst for 2026 is the company’s digital segment, which is targeting a $1 billion annual revenue run rate for its data center and AI business by year-end. SLB is currently leveraging its "One Subsea" venture to target cumulative bookings exceeding $9 billion over the next two years as deepwater activity inflects. The board has approved a 3.5% increase in the quarterly dividend to $0.295 per share, supported by a plan to return over $4 billion to shareholders in total. Despite range-bound oil prices, SLB’s shift away from capital-intensive drilling toward high-margin production services and carbon management solutions is providing significant margin stability. This "capital-light" strategy is expected to yield over $2.4 billion in share buybacks this year, reinforcing SLB's position as a premier global energy compounder.

Pitch Summary:
For as long as Netflix has been around, the company was still able to grow quarterly operating income by 25% year-over-year, reaching 1.92 billion in the latest earnings filing from $1.5 billion to $1.8 billion (in Q3 2023) • Free cash flow in 2023 is estimated to be $6.5 billion, which was generated in spite of writer’s strikes and blew past company projections for $5 billion • Operating margins of ~20% put Netflix well ahead of peers in entertainment and communications services, and is also higher than the Magnificent Seven’s average • Increased share buyback authorization of $10 billion should return equity to shareholders in 2024 • Netflix added 13.1 million new subscribers in the December quarter, well surpassing estimates of 8.97 million

BSD Analysis:
Netflix has officially entered a transformative era in 2026 following the announcement of its $82.7 billion acquisition of Warner Bros. Discovery’s studio and streaming assets. The company enters the year with over 325 million paid memberships, having successfully transitioned to a hybrid model that prioritizes advertising revenue alongside subscriptions. Management forecasts 2026 revenue to range between $50.7 billion and $51.7 billion, representing healthy organic growth of 12% to 14%. A primary narrative for the year is the expected doubling of advertising sales, which has become a "margin savior" as mature markets face subscriber saturation. Strategic initiatives for 2026 include a deeper push into live events, such as the World Baseball Classic, and the scaling of a cloud-first gaming strategy. While the Warner acquisition introduces a slight drag on margins, the company is still targeting a robust 31.5% operating margin for the fiscal year. Share repurchases have been temporarily suspended to preserve liquidity for the deal, signaling a more conservative approach to capital allocation during the integration phase. Content production has fully recovered from previous industry strikes, allowing for a strong slate of branded originals to drive healthy engagement levels throughout the year.

Pitch Summary:
Greenfirst Forest Products (GFP.TO, ICLTF) – Greenfirst is far different than Graftech. While the stock was down 37% in 2023, the relative performance spread versus peers was far less, though still very notable. While we experienced a permanent capital impairment with Graftech, we are unconvinced this is the case with Greenfirst. Management has done everything expected, including selling their Quebec mills for a healthy price, selling non-core land, improving operations, and lowering breakeven prices at both lumber and paper mills. The balance sheet is healthy, with ~$15m in net debt. Greenfirst has ~$80m in duties on deposit with the US government, which, at some point, will be resolved. While waiting for this refund (or at least a portion), the 20% duty rate paid since the mill acquisition declined to ~8% in August 2023. This 12% savings flows directly to the bottom line. While Graftech's management pulled a fast one on minority shareholders, Greenfirst's management and board are heavily aligned with shareholders. Many invested their wealth into the business. Share ownership (190m shares outstanding): Paul Rivett (Chairman)- 5.7m, Rick Doman (Former CEO, Current BoD) – 6.7m, Mike Mitchell (BoD) – 1.7m, Larry Swets (BoD) – 5.3m. With ownership aligned and actions taken thus far in line with expectations, I'm willing to believe they will maximize shareholder/personal value. We believe this will be a $3 takeout, and we expect the timing to be in the next few years.

BSD Analysis:
The manager contrasts Greenfirst favorably with Graftech, viewing the 37% decline as temporary rather than permanent capital impairment. Management has executed on key strategic initiatives including divesting Quebec mills at attractive prices, selling non-core land, and improving operational efficiency at both lumber and paper operations. The balance sheet remains healthy with minimal net debt of $15 million. A significant catalyst exists in the form of $80 million in duties on deposit with the US government awaiting resolution, while duty rates have already declined from 20% to 8%, providing immediate margin improvement. The manager emphasizes strong management alignment with board members collectively owning over 19 million shares, representing approximately 10% of the 190 million shares outstanding. This insider ownership provides confidence that management will prioritize shareholder value creation. The manager maintains a $3 takeout target, expecting monetization within the next few years as the company's asset optimization strategy unfolds.

Pitch Summary:
Graftech (EAF) – Unlucky, poor industry dynamics, and the largest shareholder, Brookfield selling. Upon making our initial investment, we were aware of the potential risks and volatility; we never thought a $2 stock price was something to worry about. As a low-cost producer, the current price implies competitors will likely go bankrupt. Instead, Graftech is the one ceding share. The Mexican plant shutdown had a far more significant impact than initially thought. Graftech is heavily exposed to the European economy, which has lagged in its recovery. With Long-term contracts ending and $9,000/mt graphite electrodes declining to $5,000+, this high operating leverage business was set for a step down in earnings. Furthermore, an estimated utilization rate of 43% for the year dramatically increases the COGS/mt. The major bomb in the third quarter was the idling of their needle coke facility, Seadrift. Seadrift is the crown jewel of the company and the primary reason Graftech has an advantageous position in the industry. The initial thesis was not predicated on one factor. The continued shift towards electric arc furnaces should drive increased demand for Graphite Electrodes. With limited new supply, which would cost $10,000/mt to bring online, Graftech was trading at replacement cost. This cost is likely even higher today due to inflationary pressures seen recently. 2nd, Seadrift allows Graftech to internally produce needle coke, the primary raw material to produce graphite electrodes. In addition to its use in graphite electrodes, needle coke is used in the anodes of lithium-ion batteries of electric vehicle batteries. As demand for EVs increased, needle coke supply would tighten, resulting in higher prices. Graphite electrodes typically trade at a spread over needle coke, ranging from $2,500 to $3,500. While competitors price graphite electrodes off higher needle prices, Graftech's costs remain stable, allowing them to price at the spot rate competitors charged. Graftech margins and profits would dramatically increase, and debt could be repaid with this cash, further de-risking the balance sheet. We invested in mid-2021, expecting a stable market, which did not materialize. Graphite Electrode pricing was down substantially as demand fell off a cliff due to COVID-19. However, prices rebounded nicely at the start of 2022. Spot prices were up ~40% y/y in Q1 2022 to $6,050; while we weren't expecting that to continue, we believed there was still substantial room for prices to increase. Throughout 2022, prices were stable as inventory rationalized due to the weak European economy. Today, prices are in the low $ 5,000's. While customer inventory is normalized, demand is sluggish, pressuring ectrode prices. HEG Limited, a Graftech competitor, saw its stock rise 85% in 2023 compared to -54% for EAF. Earnings declined from $1.47 In 2022 to an estimated -$0.28, while HEG's declined from $113.86 to $110.29. The stark difference is the opposite we would have envisioned. Today, Graftech is contending with an excess supply of electric vehicles, pressuring needle coke demand. Graftech refinanced their 2025 note to 2029, putting them in a much stronger position than they would otherwise be. All $925m of debt is due in 2029. Today, the stock is priced as if they have a liquidity issue and business will never recover. Liquidity – $173m of cash on hand with ~$100m of excess inventory to work down. No maturities are due until 2029. Analysts estimate EAF will lose money in 2024 but recover to be FCF positive in 2025. Given the lack of near-term maturities, Graftech is positioned to weather the downturn. Business - The issue of ZERO clarity on the go-forward business is the central issue. While we believe they could generate $0.50 in EPS in 2025, the range of outcomes is likely between $0.00 and $1.00+. The recent issues make this a show-me story. We continue to maintain the position for the following reasons. 1. BAM selling overhang is almost over, as they own 12.5% after distributing/selling shares to minority investors in December. 2. JV with a battery maker could diversify revenue/earnings stream 3. Trading well below replacement cost 4. Lean inventory in Europe could lead to higher pricing should demand recover 5. An estimated 170Mt/year of EAF capacity additions by 2030, translating to ~200Kt/year of incremental electrode demand. ~13% slated for NA and ~33% each for the EU and the Middle East.

BSD Analysis:
The manager provides an extensive post-mortem on Graftech, acknowledging a significant investment mistake while outlining reasons for maintaining the position. The original thesis centered on increasing electric arc furnace adoption driving graphite electrode demand and Graftech's competitive advantage through its Seadrift needle coke facility. However, multiple factors derailed the investment: graphite electrode prices collapsed from $9,000/mt to $5,000/mt, European economic weakness pressured demand, and critically, the Seadrift facility was idled. The manager admits the stock declined 73% in 2023 while competitor HEG rose 85%, highlighting poor relative performance. Despite these setbacks, the manager maintains the position based on Brookfield's selling overhang nearing completion, potential battery joint ventures, trading below replacement cost, and expected demand growth from new electric arc furnace capacity. The investment represents a classic value trap where fundamental deterioration overwhelmed the low valuation.

Pitch Summary:
Aercap acquired GECAS in 2021 for cash and stock. GE consistently sold their AER shares, creating heavy selling pressure. In addition, Aercaps planes on lease to Russian airlines were written off in 2022. Thus far, they received $1.2B in insurance recoverables, and ~$2B remains outstanding. Insurance proceeds provide substantial ammunition to aggressively repurchase shares. Ongoing engine and airplane production issues created a "hard market" for secondary transactions. Aercap continually sells planes and engines for over 1.2x carrying value, using proceeds to repurchase stock at or below book value. Note- at a couple of turns of leverage, this ROE is closer to 70%-80%. Repurchasing stock trading at 90% of BV is almost a 100% delta between private market transactions and the stock. That is one hell of a trade! With airlines scrambling for capacity, Aercap holds substantial bargaining power, driving higher rates and longer terms. Business is flying high.

BSD Analysis:
The manager identifies Aercap as a top 2024 pick, emphasizing the resolution of key overhangs that had pressured the stock. GE's consistent selling following the GECAS acquisition created artificial downward pressure that has now largely abated. The Russian aircraft write-offs, while initially negative, are generating substantial insurance recoveries with $1.2 billion already received and $2 billion outstanding. These proceeds provide significant capital for share repurchases at attractive valuations. The manager highlights an exceptional arbitrage opportunity where Aercap sells aircraft at 1.2x book value while repurchasing shares at 90% of book value, creating substantial value for remaining shareholders. Supply constraints in aircraft production have created a favorable pricing environment, allowing Aercap to command higher lease rates and longer terms. The combination of resolved overhangs, insurance recoveries, and favorable market dynamics positions the company for strong returns.

Pitch Summary:
Top picks for 2024 - Five Point Holdings (FPH) and Aercap (AER) Both situations are similar, with significant overhangs resolved in late 2023. Five Point had a debt problem, with $625m coming due in 2025, with no credible path to repay or refinance. In addition, former CEO Emile Haddad ran the business as a personal cash cow. Since Dan Hedigan took over, the business has run lean, and cash generation is prioritized. In December, they announced a debt exchange offering, exchanging the 2025 notes for 2027 notes with a higher interest rate while repaying ~$100m of the balance. These additional years, combined with laser focus from management, set this company up for success in 2024 and beyond.

BSD Analysis:
The manager presents Five Point Holdings as a top pick for 2024, highlighting a successful debt restructuring that resolved a significant liquidity crisis. The company faced $625 million in debt maturities in 2025 with limited refinancing options, creating substantial financial stress. Under new CEO Dan Hedigan, management has shifted focus from the previous CEO's cash extraction to lean operations and cash generation. The December debt exchange offering extended maturities to 2027 while reducing the principal balance by approximately $100 million. This restructuring provides the company with crucial breathing room and positions it for improved performance. The manager views the resolution of these debt overhangs as a key catalyst for outperformance in 2024. The investment thesis centers on operational improvements under new leadership combined with a strengthened balance sheet.

Pitch Summary:
Pulling further on the thread of competitive entrenchment, Boston Omaha is exercising unusual care to enter businesses with significant supply constraints or where identifiable and enduring cost advantages can be leveraged. Boston Omaha's billboard business (Link) owns roughly 4,000 structures with approximately 7,600 faces in 12 states making it the sixth largest out-of-home (OOH) advertising operator in the United States. Link is a good, albeit cyclical, business with irreplicable assets and attractive economics we believe will look similar decades from now. Billboards have proven to be a cost-effective advertising medium with enormous reach. At the same time, significant barriers to entry stemming from the Highway Beautification Act of 1965 and stringent state & local derivatives make it all but impossible to add new supply in existing markets—digital conversions notwithstanding. These two factors—low-cost relative to reach and supply constraints—provide durable growth as advertising demand increases across the country over time. Boston Omaha Broadband (BOB) has more than 40,000 high speed internet subscribers across 17 states under the Utah Broadband, AireBeam, InfoWest, and Fiber Fast Homes (FFH) brands. Boston Omaha's plan is to build fiber internet to homes where cable and other overbuilders likely won't—a strategy that we think will result in negligible competition, high penetration levels, and attractive lifetime customer values. Of particular interest to us is BOB's rapidly growing backlog of contracted fiber subscribers in planned housing developments. These prospective customers are covered by agreements with land developers and HOAs that provide BOB with a right of first refusal to build and operate fiber to the home across entire neighborhoods under 10 - 15-year contracts. Boston Omaha believes it can earn 20% to 35% unlevered returns on these investments. BOB has increased its backlog of these deals to multiples of today's existing subscriber base and has seen the level of interest from builders accelerate. These large upfront investments won't yield immediate customer growth or cash flow, but provide a long tail of competitively insulated, high-margin and long-lived recurring revenue with modest maintenance requirements. For context on what BOB's future subscribers could be worth, Searchlight Capital recently bid $4/share to take Consolidated Communications private, valuing its 370,000 broadband subs (only 135,000 of which are high-value fiber) at $2.6 billion or $7,300/sub. Altice and Frontier Communications have other sources of revenue and a mix of copper, cable, and fiber internet customers but trade for $6,000 and $4,300/sub, respectively. Admittedly, these are far larger players, but the contractual nature associated with so much of BOB's pipeline is unique in the industry and is extremely valuable. One can reasonably envision a scenario where the value of Boston Omaha's broadband business alone exceeds today's market cap in 2-3 years' time, with the longer-term prospect of a customer base that is orders of magnitude larger than today. In addition to its owned and operated companies, Boston Omaha holds minority investments in two businesses at different stages of carving out their competitive landscapes—Sky Harbour (Sky) and Crescent Bank and Trust (CB&T). Sky is an aviation infrastructure company building home-base hangars for business aircraft at top-tier metro airports across the country. As background, most existing US hangar inventory has insufficient main-door-threshold clearance to accommodate the newest generation of business jets with tail heights greater than 24 feet. Some 16.5 million square feet of this type of aircraft were put into service from 2010 to 2020, creating an extremely constrained supply of suitable hangars. Moreover, the near impossibility of obtaining permitting for new airports in the US and the finite nature of existing airport real estate makes adding new capacity extremely difficult, resulting in jets being tied down outside on tarmacs—a nonnegotiable position for many aircraft owners. By offering airport operators high lease revenue sourced from owner-tenants prioritizing aircraft value retention, time, security, and privacy, Sky has differentiated itself from the high noise, high pollution and transient-occupied FBO model prevalent today. This novel approach and first-mover advantage has enabled Sky to secure a collection of long-term leases on increasingly finite "beach front" property while it grows its backlog of future campus sites. Sky has 29 hangars in operation today with 375k rentable square feet at three airport campuses located in Houston, Nashville, and Miami. Sky is at various stages of developing campuses that will add 42 hangars and 820k of rentable square footage to its fleet of home basing solutions. Two of these campuses are under construction with scheduled completion dates in March and April 2024. These hangars will increase Sky's footprint by 70%. Additionally, Sky recently announced the execution of three new ground leases serving the Chicago and New York City metro regions from airports in New York and Connecticut—markets that will add substantially to Sky's rentable square footage and fetch rents that far exceed any of its existing airports and those under construction. At the time of this writing, Boston Omaha's investment in Sky Harbour common stock and warrants was worth $163 million—a value we're doubtful the market fully appreciates by observing the company's total enterprise value (less than $450 million). Louisiana-based Crescent Bank and Trust has a unique advantage in that it's one of just a few banks whose assets are almost entirely indirect subprime auto loans. CB&T funds loans by offering FDIC guaranteed CDs at rates higher than competing banks because its assets earn considerably more than the traditional mix of mortgages, credit cards, commercial real estate, and prime auto loans. In the meantime, it can fund its operations materially cheaper than non-bank competitors who use high-cost bank loans, private credit sources, or the securitization markets. CB&T also uses less equity capital than its competitors without bank charters. Armed with a funding advantage management has estimated ranges from 150-500 basis points, CB&T has been investing with an eye toward earning 15%-20% returns on equity at scale on a growing base of assets. Non-bank subprime auto lending behemoth Credit Acceptance earns significantly higher returns on equity than CB&T largely because it securitizes and sells its loans where CB&T retains the majority of its loan book. As a bank, however, we believe CB&T holds a more durable advantage and that over time the value of Boston Omaha's investment in the company has the potential to be worth considerably more than the $40-$60 million we're valuing it at today.

BSD Analysis:
Ironvine presents Boston Omaha as a diversified holding company strategically entering businesses with significant competitive moats and supply constraints. The billboard business (Link) benefits from regulatory barriers dating to 1965 that prevent new supply additions, creating durable pricing power in a cost-effective advertising medium. The broadband division (BOB) targets underserved markets with fiber-to-home services, securing 10-15 year exclusive contracts with developers that could generate 20-35% unlevered returns. With 40,000 current subscribers and a backlog multiples larger, BOB's contracted nature provides unique industry value, potentially worth $6,000-7,300 per subscriber based on recent transactions. The Sky Harbour investment addresses constrained hangar supply for modern business jets, with 70% capacity expansion planned and premium rents in high-value markets like NYC and Chicago. Crescent Bank's focus on subprime auto lending provides a 150-500 basis point funding advantage over non-bank competitors, targeting 15-20% ROE at scale. Ironvine views the sum-of-parts value as significantly underappreciated by the market.

Pitch Summary:
Perhaps our best example of entrenched Competitive Positioning lies in the largest investment we've made since inception. When we bought Microsoft in 2013, we believed its dominance in the Office suite was a textbook example of a network effect—i.e. everyone uses Word, Excel, and Outlook because… everyone uses them. And we also thought the switching costs associated with moving core server workloads, the bread-and-butter of its Server and Tools business, left the company well positioned to grow with enterprise customers in the years ahead. At the time these two divisions comprised almost 70% of operating income and were making significant investments in research and growing the company's enterprise salesforce. We chronicled the evolution of Microsoft from 2013 – 2019 in a fourth quarter 2019 letter, outlining how the advantages that initially attracted us to the company grew into a more valuable characteristic: huge scale, and a distribution footprint providing direct access to thousands of enterprises across the globe, that has resulted in growing cost advantages. Microsoft's user base is, in a word, enormous: - Windows has 1.4 billion users, generated $21.5 billion in revenue in 2023, yet represents only 11% of the company's top line - Paid subscriptions for the Office suite (now called Microsoft 365) exceed 480 million and contribute $50 billion in annual run rate revenue - LinkedIn had 985 million users and generated $15 billion in revenue - Microsoft's security business brings in roughly $20 billion annually—more than the five largest pure play cybersecurity firms combined - The company's gaming portfolio has 13 franchises with $1 billion+ in revenue - Powering it all is Azure, Microsoft's's global cloud network. The company's server products and cloud services revenue will exceed $90 billion in 2024, from a base of $22 billion in 2017. Scale is an extremely powerful advantage. The larger a company grows, the more resources it has to expand its core competencies, making it incrementally more difficult for potential upstarts to catch. In Microsoft's case the capital intensive nature of the cloud computing business presents a much different hurdle for the proverbial "two guys in a garage" to overcome than the legacy software business did. Specifically, we expect Microsoft will invest more capital in 2024 and 2025 than in the six years from 2017 – 2022 combined. We estimate the company will deploy roughly $260 billion in capex over the next five years, more than 2.5x the spend from 2019 – 2023. And this ignores R&D expense which now exceeds $27 billion annually! Scaling a capital budget from $8 billion to $40 billion comes with the risk of losing focus as complexity increases, but Microsoft's track record of execution gives us confidence that this will be business as usual. CFO Amy Hood described the company's investment discipline on its most recent earnings call: "…if you have a consistent infrastructure from the platform all the way up through its layers, that every capital dollar we spend, if we optimize revenue against it, we will have great leverage. Because wherever demand shows up in the layers, whether it's at the SaaS layer, whether it's at the infrastructure layer, whether it's for training workloads, we're able to quickly put our infrastructure to work generating revenue… so when you think about our investment in AI, yes, because we're committed to leading this wave and see demand, you will see that impact in COGS growth. But what we're committed to making sure it's highly leveraged and making sure you see the same growth in revenue." Despite the growing magnitude of capital spend Microsoft has been able to maintain impressive returns on its investments. Returns on tangible capital of 60 – 80% are not easily attained and represent one of the clearest quantitative measures that Microsoft is providing value others cannot. The margin evolution shown in the charts below further illustrate this point. Microsoft's dominant market share in key verticals has allowed it to commercialize new tools in a way others cannot. Look no further than Teams, which now boasts 320 million users from a base of effectively zero before 2020. Teams has become nearly ubiquitous across global enterprise, to the point where the European Union is actively reviewing the product from an anti-trust perspective. Notably, Microsoft was not the first to bring collaboration and video conferencing to bear, nor was its version necessarily the best. Free is a powerful price point for a "good enough" product, and only Microsoft has the scale to include emerging technology into an existing bundle at no incremental charge. Since reaching critical mass the company has taken meaningful share of the collaboration and conferencing market and now charges for a premium version of the product, along with the less tangible (but real) benefit of increasing the value of the Microsoft 365 offering and therefore customer lock-in. Moving from fast follower to first mover, Microsoft's shepherding of developer platform GitHub is another useful case study. The GitHub acquisition has been a widely regarded success, with the user base now four times larger than at purchase in October of 2018. The product has also grown Microsoft's clout immensely within the fast-growing and strategically important software development community. Concurrent with this ongoing evolution at GitHub, Microsoft has been trading Azure compute capacity with OpenAI for access to groundbreaking tools it is developing in real time. One of the earliest tangible uses that has emerged is the ability to use new models to auto-generate software code from plain language descriptions with surprising accuracy. Microsoft quickly embedded the technology (dubbed "GitHub Copilot") into the software and released it in technical preview in June of 2021, and more broadly a year later. GitHub Copilot has spread like wildfire amongst the developer community. The company's data shows Copilot customers now use the tool to generate 46% of the code in their programming projects, with 90% of users reporting improved productivity. In its first 18 months GitHub Copilot has grown to more than one million paid users, and 37,000 organizations have subscribed to the enterprise version, equating to 40% growth on a quarter over quarter basis. It's early days, but similar to the Teams example, it's clear that combining a scaled user base (GitHub) and infrastructure stack (Azure) allowed Microsoft to bring this new technology (generative AI) to market in a way few others could. We could fill multiple pages with more examples of Microsoft pressing its advantages to enhance existing tools and create new extensions. The company has brought the ability to create custom applications to the masses with its Power Platform, which now has more than 20 million monthly users (+40% year-over-year). It has released numerous versions of Copilots across other applications, including a broad Microsoft 365 offering that went live last November. The company's Dynamics CRM product continues to take share each quarter. And what has us most excited about sitting in this advantaged seat is that the key markets Microsoft plays in are far from mature. Last July Microsoft CEO Satya Nadella referred to the big picture opportunity being in "inning two or inning three of even the cloud migration." The legacy Office products are still growing users at a double-digit clip. Service technicians, drivers, maintenance managers, and a host of other jobs are made far more efficient with a Microsoft 365 account, accessed on a smart phone, allowing real time data to be processed straight through to the corporate ERP system. The company's Enterprise Mobility + Security offering, which allows IT departments to monitor these devices, is also growing users at a double-digit annual rate. Gaming is a $250 billion market, growing high single-digits, with Microsoft positioned to continue growing faster than the market. The list goes on. Despite the world being in a far different place than it was 11 years ago we see similarities to when we bought our first shares of Microsoft. We're invested in a behemoth with significant advantages. The company is building best-in-class tools that enhance users' efficiency at a price few (no?) competitors could profitably match. And it has continued making the investments required to pave the way for years of growth to come. While we wouldn't pretend to know with specificity where the business will be in five years, consider a few anecdotes. The recently released Microsoft 365 Copilot is priced at $30 / user / month. One-third of today's commercial user base subscribing would result in roughly $50 billion of incremental revenue, equating to $20 billion+ of additional operating income on a 2023 base of $90 billion. Similarly, if the company's return on the capital expenditures we have assumed in the next five years is cut in half from historical figures (from 70% to 35%), operating income would still double over that period. With this kind of opportunity in place we're content to allow time to continue to work its course.

BSD Analysis:
Ironvine presents a compelling bull case for Microsoft centered on the company's entrenched competitive positioning and massive scale advantages. The manager highlights Microsoft's evolution from network effects in Office to a dominant cloud infrastructure provider, with Azure revenue growing from $22 billion in 2017 to an expected $90 billion in 2024. The firm emphasizes Microsoft's exceptional capital efficiency, maintaining 60-80% returns on tangible capital despite scaling capex from $8 billion to a projected $40 billion annually. Key growth drivers include the rapid adoption of AI-powered tools like GitHub Copilot (1 million paid users in 18 months) and Teams (320 million users from zero pre-2020). The manager sees significant monetization potential from Microsoft 365 Copilot at $30/user/month, which could generate $50 billion in incremental revenue if one-third of commercial users subscribe. With markets still in early innings of cloud migration and double-digit user growth across legacy products, Ironvine views Microsoft as a competitively advantaged behemoth positioned for sustained growth.

Pitch Summary:
PAR – Par is organized into three operating segments. The Brink business, a SAAS point-of-sale (POS) platform for quick-service restaurant operators, is the most important. Sales have been growing rapidly on the back of new customer wins and aided by acquisition with adjacent product rollouts in payments, back office, loyalty, online ordering and drive-through offerings that all connect to a restaurant's point-of-sale (POS) operating software. Customer wins have been accelerating, partly aided by the recent signing of Burger King's US locations, which may be followed by international locations at some point down the road. It now looks increasingly likely that Par/Brink will be the winner-take-most player in the POS market for the large quick-service restaurant segment, with additional wins among large, scaled customers offering continued attractive growth. High margin annual recurring revenue (ARR) revenue in this segment has grown from less than $20M four years ago, to north of $150M on a run-rate basis ending this past year when factoring in domestic Burger King locations. Today, Brink generates ~$5/share of ARR on a run-rate basis and could accelerate meaningfully beyond $200M+ in 2025. Though the company has periodically talked about a sale of its government business (a defense contractor with more than $100M in profitable sales around which the corporate entity was first built) in the past, it now seems a sale relatively soon is increasingly likely. The government business is performing well and could fetch ~$100M or more, which the company can put towards furthering their Brink growth plans. Additionally, the Brink business segment is now much farther along, and thus the company looks better positioned to move forward with the sale. A hardware business providing restaurant customers a range of terminals, portable tablets, payment devices and various hardware pieces remains, profitably contributing over a $100M in sales to the corporate entity as well.

BSD Analysis:
The manager identifies Par Technology as a compelling SaaS growth story centered on the Brink point-of-sale platform for quick-service restaurants. The investment thesis is anchored by explosive ARR growth from under $20M to over $150M in just four years, with the recent Burger King contract win serving as a major validation and growth catalyst. The manager sees Par/Brink emerging as the dominant player in the large QSR POS market, with current ARR of approximately $5 per share potentially accelerating beyond $200M by 2025. The company's multi-segment structure provides additional value creation opportunities, particularly through the likely divestiture of the profitable government defense business, which could generate $100M+ in proceeds to fuel Brink's expansion. The hardware segment adds another $100M+ in profitable revenue, creating a diversified technology platform. The combination of high-margin recurring revenue growth, market leadership positioning, and potential asset monetization creates multiple value drivers. However, execution risk remains significant given the competitive restaurant technology landscape and the company's dependence on large customer wins for growth acceleration.

Pitch Summary:
BXC – Bluelinx is a company we have owned before and one that looks quite different today than it did prior to the pandemic. As a building products distributor delivering primarily lumber and millwork and various engineered wood products that go in new homes and support repair and remodeling needs, the company fulfills a major need in the homebuilding supply chain. Over the last couple of years, two major changes have occurred. The company has flipped their product mix (from previously ~80/20% structural/specialty to ~30/70% structural/specialty today. Structural product gross margins (primarily lumber) range from 8% – 10%. Specialty gross margins (primarily engineered wood products and millwork, etc.) range from 17% – 19%. With the two product categories requiring similar costs to serve and offering comparable pull-through margins, the company now aspires to achieve an EBITDA margin of 10%, versus a pre-pandemic aspiration of 5%. Additionally, pre-Covid, the balance sheet was levered, though the company was asset rich. Today on the back of the Covid boom, the balance sheet is now in great shape. The company recently repurchased 15% of its shares, and just put another share repurchase authorization in place for a similar amount. Depending on the level of share shrink from the buyback and assuming topline volumes grow in the mid/high single digits on the back of similar single-family housing starts growth, earnings could again inflect meaningfully higher, perhaps surpassing $25 in a couple years.

BSD Analysis:
The manager presents a compelling turnaround story for Bluelinx, highlighting a dramatic transformation in the company's business model and financial profile. The key thesis centers on a strategic product mix shift from low-margin structural products (lumber) to higher-margin specialty products (engineered wood and millwork), effectively doubling the company's EBITDA margin target from 5% to 10%. This operational improvement is complemented by a significantly strengthened balance sheet following the COVID construction boom, enabling aggressive capital returns through share repurchases totaling 30% of the float. The manager projects earnings could exceed $25 per share within a couple of years, driven by modest volume growth aligned with housing starts and continued share count reduction. The investment appears well-positioned to benefit from both operational leverage and multiple expansion as the market recognizes the company's improved fundamentals. The combination of margin expansion, balance sheet strength, and shareholder-friendly capital allocation creates multiple paths to value creation. However, the thesis remains dependent on sustained housing market activity and successful execution of the product mix transition.

Pitch Summary:
Saker Aviation (SKAS) – is a tiny company managing the heliport in downtown Manhattan. Total market cap is only $8.5 million based on just under one million shares outstanding and a current $8.50 share price. As of September 30, 2023 the company had $8.6 million in cash. Earnings in the September quarter were $1.20 per share. Unfortunately, that level of earnings is not likely to continue. During the September quarter the company did not have to pay any concession to the city of New York. Historically that amounted to 18-25% of revenues. Under the recently signed six-month operating agreement (with two possible six-month extensions) that started in mid-December, the new concession will be 30% of revenues. Had the 30% concession rate been in place in the September quarter operating income would have been 50% lower, but still very solid. Saker used to have a management contract with a former related party to manage the heliport. They terminated the agreement early in Q2 and, so far, have been able to manage the heliport themselves with little to no extra cost. Going forward, assuming they can manage the heliport internally and at least one six-month extension is exercised, we expect Saker to earn $1.70 per share in 2024, even after incurring the 30% concession fee to the city. If they can agree on a longer-term deal that does not require Saker to fund significant capital improvements, we think the stock can trade at a multiple to earnings versus currently trading at a liquidation value. In other words, we think we have meaningful potential upside with minimal downside, a scenario we like to have. It is the potential 50-100% upside from the current price which makes it worthwhile for the fund to have a 2% position in such a small stock.

BSD Analysis:
Eriksen identifies Saker Aviation as an asymmetric opportunity trading near liquidation value with substantial upside potential. The company's $8.5 million market cap is nearly matched by $8.6 million in cash, providing significant downside protection while the Manhattan heliport franchise offers meaningful earnings power. Despite the new 30% concession rate to New York City (up from historical 18-25%), management's successful internalization of heliport operations eliminates external management costs and maintains solid profitability. Expected 2024 earnings of $1.70 per share represent a 20% yield at current prices, demonstrating strong cash generation even under the higher concession structure. The six-month operating agreement with potential extensions provides operational visibility, while longer-term contract negotiations could unlock multiple expansion if capital improvement requirements are minimized. Saker's unique Manhattan heliport monopoly creates a defensive moat with limited competition and steady demand from high-net-worth individuals and corporate clients. The combination of asset-backed downside protection, strong cash generation, and potential re-rating from liquidation to earnings multiple supports Eriksen's 50-100% upside target, justifying the 2% position size despite the company's small scale.

Pitch Summary:
United Bancorporation of Alabama (UBAB) – is another ECIP recipient bank. The current price is $40.50 per share with 3.5 million shares outstanding, resulting in a market cap of just over $140 million. The bank received almost $124 million in ECIP funds. Trailing earnings are $7.31 per share. We expect fourth quarter earnings of $4 per share due to a $9 million capital magnet award (i.e. grant). For 2024 we are expecting $8 per share, meaning the bank is trading at 5 times forward earnings at 1.2 times yearend book value. Of course, book value grossly underestimates the value of the ECIP funds to common shareholders. Fair value of the preferred stock is 15-25% of its face value since the maximum dividend rate is 2%. If we assume fair value is 25% it results in an adjusted book value of $59 per share. UBAB is one of the few banks who has been able to meaningfully increase lending since receiving ECIP funds. Loans have increased from $686 million as of June 2022 to $808 million as of September 2023. So they may be able to have the preferred dividend lock in at a rate lower than 2%. Like Citizens, we think the fair value of UBAB is twice the current price.

BSD Analysis:
Eriksen presents a strong bull case for United Bancorporation of Alabama, highlighting exceptional valuation metrics and effective ECIP capital deployment. With $7.31 trailing earnings per share and expected 2024 earnings of $8 per share, the bank trades at only 5x forward earnings, representing significant undervaluation for a profitable growing institution. The $124 million ECIP injection relative to a $140 million market cap creates substantial embedded value, as the preferred stock's 2% maximum dividend rate implies fair value of only 15-25% of face value. Using a 25% fair value assumption generates an adjusted book value of $59 per share versus the current $40.50 price, indicating 46% upside to adjusted book alone. UBAB's operational excellence distinguishes it from peers, having grown loans from $686 million to $808 million since receiving ECIP funds, demonstrating effective capital utilization. The expected Q4 boost from a $9 million capital magnet grant provides additional earnings momentum. Strong loan growth may enable the preferred dividend to lock below the 2% maximum, further benefiting common shareholders. Eriksen's price target of double current levels reflects the combination of cheap valuation, strong execution, and ECIP-enhanced capital structure.

Pitch Summary:
Citizens Bancshares (CZBS) - is an Atlanta, Georgia based bank that received $95.7 million of additional capital via the US Treasury's Emergency Capital Investment Program (ECIP) at the end of June 2022. During the fourth quarter the bid price increased from $36.90 to $37.70 per share. In a break from past practice, Citizens reported quarterly earnings publicly, instead of just filing a quarterly Call Report. Earnings for the third quarter of 2023 were $0.82 per share due to a $3 million write-down on a loan now held at the parent corporation. Absent the write-down earnings were excellent. We believe the current annualized earnings run rate is approximately $7 per share, which is quite low in relation to its $38 share price. We believe the bank understands how to put the ECIP money to work to grow the bank while also returning capital to shareholders via dividends and share repurchases. Under ECIP, recipient banks are limited to returning no more than the current year's income plus the prior two years' income, less any returns of capital in the prior two years. In 2023 Citizens returned $5.5 million to shareholders by paying $1.5 million in dividends and repurchasing 5% of its shares for a cost of $4.0 million. Our estimate was Citizens started 2024 with the ability to use $16 million for capital return which would grow as they earn throughout the year. This is a significant amount in relation to Citizen's yearend market cap of less than $72 million. We would love to see them repurchase all the stock they can at current prices. We would also expect a dividend this spring of $0.75 to $1.00 per share. We continue to think the stock is worth nearly twice its current price.

BSD Analysis:
Eriksen presents a compelling bull case for Citizens Bancshares, emphasizing the bank's effective utilization of $95.7 million in ECIP capital and attractive valuation metrics. Despite a one-time $3 million loan write-down impacting Q3 earnings, the underlying business demonstrates strong profitability with an estimated $7 annualized earnings run rate, creating a modest 5.4x P/E ratio at the $38 share price. Management's capital allocation strategy is shareholder-friendly, having returned $5.5 million in 2023 through $1.5 million in dividends and aggressive share repurchases totaling 5% of outstanding shares. The ECIP structure allows substantial capital returns, with an estimated $16 million available for 2024 distributions against a sub-$72 million market cap, representing over 22% of market value. Expected spring dividend of $0.75-$1.00 per share provides attractive yield while continued share buybacks at current levels would be highly accretive. The bank's improved transparency through public quarterly reporting signals enhanced corporate governance. Eriksen's price target of nearly double current levels reflects the combination of strong earnings power, aggressive capital returns, and ECIP-enhanced balance sheet strength.