Investment Pitches

Pitch Summary:
LS Electric is another name in Korea that is poised to benefit, but for additional reasons. While LS also makes transformers, it mainly focuses on hardware & installation services to connect new factories to the grid (e.g., switchgear, switchboards, controls, etc.). With the CHIPS Act ($280bn designated for tech onshoring), Korean car, battery, and semiconductor companies are building facilities in the U.S. and taking LS along for the ride. LS has long-standing relationships with these Korean customers and is winning business as a turnkey electrical solution provider for their new U.S. factories. The company's backlog now stands at KRW 2.5tn (nearly a year of sales), up 43% vs. a year ago and up 133% vs. December 2021. At a very reasonable 9x PE, we think LS is far from peak earnings – especially if they achieve margins equivalent to the last cycle (8-9% net income margins vs. 4-5% currently). We believe the stock could double from here.

BSD Analysis:
The manager presents a strong bull thesis for LS Electric based on its unique positioning to benefit from Korean industrial onshoring to the U.S. The investment case relies on the CHIPS Act driving $280 billion in technology onshoring, with Korean companies building U.S. facilities and bringing LS Electric as their preferred electrical contractor. LS's competitive advantage lies in long-standing relationships with Korean automotive, battery, and semiconductor companies, positioning it as a turnkey electrical solution provider. The company's backlog of KRW 2.5 trillion has grown 133% since December 2021, providing strong revenue visibility. At 9x PE with current net margins of 4-5% versus historical peaks of 8-9%, the manager sees significant earnings upside potential. The price target implies 100% upside from current levels.

Pitch Summary:
One of our favorite names in the space is HD Hyundai Electric, a Korean company that was historically more domestically-focused but has seen a surge in demand from U.S. utilities as U.S. transformer manufacturers have run out of capacity. HD also has easy access to electrical steel in Korea, a unique raw material its U.S. counterparts struggle to get. HD is now working on a U.S. capacity expansion and they think profit margins can hit historic highs as U.S. sales carry higher pricing/margins. Expectations are for 20% growth next year with expanding margins, yet the stock only trades on less than 10x PE with a 7.5% FCF yield. Its order backlog is an impressive KRW 4.7tn (2-3 years' worth of sales), up 60% compared to a year ago and up 147% compared to December 2021.

BSD Analysis:
The manager presents a compelling bull case for HD Hyundai Electric based on structural demand drivers and competitive advantages. The thesis centers on the company's positioning to benefit from U.S. electrical grid modernization as domestic transformer manufacturers reach capacity constraints. HD's access to electrical steel in Korea provides a critical raw material advantage over U.S. competitors. The company is expanding U.S. capacity to capture higher-margin international sales, with management expecting record profit margins. At less than 10x PE with 20% expected growth and a 7.5% FCF yield, the valuation appears attractive. The impressive order backlog of KRW 4.7 trillion represents 2-3 years of sales and has grown 147% since December 2021, providing strong revenue visibility.

Pitch Summary:
GetBusy provides online document exchange systems—primarily for accountants in the U.K.—and its Australian/New Zealand and U.S. business are growing well. GetBusy spun out of Reckon in August 2017, and has continued to grow since then. GetBusy does not earn money, investing through higher expenses to grow its existing businesses and attempting to launch new products. The underlying businesses are profitable and sustainable in the U.K., and potentially in the U.S. and Australia/New Zealand.

BSD Analysis:
GetBusy operates as a cloud-based document management software provider, primarily serving accounting firms in the UK with expanding operations in Australia, New Zealand, and the US. The company spun out from Reckon in August 2017 and has maintained consistent growth across its geographic markets. While GetBusy currently operates at a loss due to strategic investments in growth and new product development, the underlying UK business demonstrates profitability and sustainability. The company's expansion into US and Australian markets shows promising growth trajectories, suggesting successful replication of the UK business model. GetBusy's focus on the accounting vertical provides specialized expertise and deep customer relationships in a stable, recurring revenue market. The investment phase reflects management's confidence in market opportunities and long-term value creation. The combination of proven UK profitability and international expansion potential creates an attractive growth story in the professional services software market.

Pitch Summary:
Frontdoor sells home service plans to homeowners. The company contracts with HVAC and other contractors and dispatches them when customers have problems with one of their major home appliances and systems (furnace, air conditioning, refrigerator, electrical system, etc). Frontdoor spun out of ServiceMaster in October 2018. Frontdoor serves about 2% of U.S. homes, and uses its free cash flow to grow organically, pay down debt, repurchase shares, and more recently – to launch an app that connects service experts with customers on a video chat. Frontdoor currently trades at an attractive upside-to-downside ratio.

BSD Analysis:
Frontdoor operates in the home service plan market, providing repair and replacement coverage for major home systems and appliances through a network of contracted service providers. The company spun out from ServiceMaster in October 2018 and currently serves approximately 2% of U.S. homes, indicating substantial room for market penetration growth. Frontdoor's business model generates recurring revenue through service plan subscriptions while managing costs through contractor relationships. Management demonstrates balanced capital allocation by investing in organic growth, debt reduction, and share repurchases. The recent launch of a video chat app connecting customers with service experts represents innovation in customer service delivery. The large addressable market of U.S. homeowners combined with low current penetration provides significant expansion opportunities. Frontdoor's defensive business model and multiple growth initiatives create an attractive investment proposition at current valuations.

Pitch Summary:
Credit Acceptance is a subprime auto lender, enabling subprime borrowers to buy vehicles from used car dealerships. The business has profitably gained share in a large and difficult market for more than two decades. Management allocates free cash flow to growing the business and repurchasing shares at attractive prices. Credit Acceptance currently trades at an attractive upside-to-downside ratio.

BSD Analysis:
Credit Acceptance operates in the challenging subprime auto lending market, serving borrowers with limited credit histories through used car dealerships. The company has demonstrated remarkable consistency by profitably gaining market share over more than two decades in this difficult lending environment. This track record suggests superior underwriting capabilities and operational expertise in managing credit risk. Management's capital allocation strategy focuses on reinvesting in business growth while opportunistically repurchasing shares when trading at attractive valuations. The subprime auto lending market remains large and underserved, providing ongoing growth opportunities for skilled operators. Credit Acceptance's proven ability to generate profits in this challenging sector while expanding market presence demonstrates competitive advantages and management execution. The combination of market leadership, consistent profitability, and disciplined capital allocation creates an attractive long-term investment opportunity.

Pitch Summary:
Advantage Solutions works with brands and stores to sell products through stores. The company is one of the largest managers of in-store sampling programs in the U.S. (for example, would you like to try this new brand of: cheese/chips/dip/etc.) Advantage Solutions was a SPAC-merger completed in October 2020. Advantage Solutions is a capital light business that earns high returns on capital. It has a meaningful debt load, though the debt lacks onerous covenants and does not come due for several years. Advantage Solutions uses its free cash flow to repay debt and acquire smaller competitors. The company currently trades at an attractive upside-to-downside ratio.

BSD Analysis:
Advantage Solutions operates as one of the largest managers of in-store sampling programs in the U.S., facilitating product trials and sales for consumer brands. The company emerged from a SPAC merger in October 2020 and operates a capital-light business model that generates high returns on capital. While ADV carries meaningful debt, the obligations lack restrictive covenants and have extended maturity profiles, providing operational flexibility. Management demonstrates disciplined capital allocation by using free cash flow for debt reduction and strategic acquisitions of smaller competitors. The business model benefits from recurring relationships with both brands and retailers, creating defensive revenue streams. The company's market-leading position in in-store marketing provides competitive advantages and pricing power. Despite the debt burden, the combination of high returns on capital and strategic debt management creates an attractive risk-adjusted investment opportunity.

Pitch Summary:
We added to our position in Nilorn (2% of our fund, at SEK 54.4/share). Each of these three businesses are ugly ducklings – high quality businesses, temporarily out of favor in the stock market. During the quarter, Nilorn traded above our buy price for most of July and August, but we eventually got our shares. Nilorn designs and delivers tags and labels for European clothing brands. The company combines just-in-time delivery with quality design that can elevate the customer's products in the eyes of the end consumer. Management uses free cash flow to grow the business and pay a dividend. The company's returns on capital are about 30%. Nilorn currently trades at an attractive upside-to-downside ratio.

BSD Analysis:
Curreen Capital added to their existing Nilorn position at SEK 54.4 per share, bringing the holding to 2% of the fund. Nilorn operates in the specialized niche of designing and delivering tags and labels for European clothing brands, combining just-in-time delivery with quality design that enhances customer products. The company demonstrates exceptional capital efficiency with returns on capital around 30%, indicating strong competitive positioning and operational excellence. Management's disciplined capital allocation includes reinvesting in business growth while maintaining dividend payments to shareholders. The manager waited patiently through July and August when shares traded above target levels before securing the desired entry point. Nilorn represents a high-quality European small-cap with strong fundamentals trading at an attractive risk-adjusted valuation. The company's specialized market position and impressive returns metrics support the contrarian investment thesis.

Pitch Summary:
We bought a 3% position in Link Administration (paying A$1.42/share). Each of these three businesses are ugly ducklings – high quality businesses, temporarily out of favor in the stock market. We buy good businesses when they are available at a meaningful discount to my downside valuation. In my experience, opportunities to buy a good business at a meaningful discount (say for 2/3rds of my downside valuation) have been relatively rare, but they have generally worked out very well. We bought Link Administration at A$1.45, and then bought more at A$1.36.

BSD Analysis:
Curreen Capital established a 3% position in Link Administration, initially purchasing shares at A$1.42 and subsequently adding at A$1.45 and A$1.36 as the stock declined. The manager views Link Administration as another 'ugly duckling' - a high-quality business trading at a significant discount to intrinsic value. The investment strategy demonstrates Curreen's disciplined approach of averaging down when quality companies become even cheaper. Link Administration operates in the financial services sector, providing administration solutions across superannuation and investment markets. The manager's willingness to add to the position at lower prices reflects strong conviction in the company's fundamental value proposition. This contrarian investment aligns with Curreen's methodology of buying quality businesses at meaningful discounts to downside valuations. The Australian financial services company represents an opportunistic value play in a temporarily depressed market.

Pitch Summary:
We bought a 2% position in Advance Auto Parts (paying $55.04/share). Each of these three businesses are ugly ducklings – high quality businesses, temporarily out of favor in the stock market. We buy good businesses when they are available at a meaningful discount to my downside valuation. In my experience, opportunities to buy a good business at a meaningful discount (say for 2/3rds of my downside valuation) have been relatively rare, but they have generally worked out very well. Advance Auto Parts took its time in getting to our buy price, but near the end of September we were able to buy it too.

BSD Analysis:
Curreen Capital initiated a 2% position in Advance Auto Parts at $55.04 per share, viewing it as a high-quality business temporarily out of favor. The manager characterizes AAP as an 'ugly duckling' - a fundamentally sound company trading at a meaningful discount to intrinsic value. The investment thesis centers on buying quality businesses at substantial discounts to downside valuations, typically around two-thirds of fair value. The manager's patient approach paid off as AAP eventually reached their target buy price in late September. This contrarian positioning reflects confidence in the company's underlying business quality despite current market sentiment. The investment aligns with Curreen's disciplined value approach of requiring significant upside-to-downside ratios. AAP represents an opportunistic purchase in the automotive aftermarket sector during a period of market pessimism.

Pitch Summary:
Agilent is a leading life science tools and diagnostics company with a reputation for highly reliable chromatography and mass spectrometry instruments used for chemical measurement and analysis. Agilent serves a wide range of end markets, the largest of which is pharmaceuticals, where its instruments are used not only to discover and develop new drugs, but also to assure their quality when being manufactured. In addition to selling sophisticated analytical instruments, it also sells all the consumables and services required to run and maintain the instruments. These dynamics drive a resilient, growing revenue base that buffers the company from the inherent fluctuations in instrument demand. Over the long-term we believe Agilent's end markets should grow at above-average rates, driven by biopharmaceuticals, electric batteries, semiconductors, and water testing, among others. Outside of the core chromatography and mass spectrometry franchises, it is investing heavily in the burgeoning diagnostics and genomics industries. We are optimistic about a couple of these areas, including advanced gene sequencing and nucleic acid solution, where it manufactures key inputs required to make the next generation of biopharmaceuticals. Although we've followed the business for a long time, we decided to initiate a position this quarter as investor focus has shifted away from the positive attributes of the business towards moderating growth which follows a couple years of very strong results. In our view, the souring sentiment presented the opportunity to purchase shares at a discount to our appraisal of intrinsic value.

BSD Analysis:
Madison initiated a position in Agilent Technologies, a leading life sciences tools and diagnostics company known for reliable chromatography and mass spectrometry instruments. The investment thesis centers on Agilent's dominant position in pharmaceutical markets, where its instruments are essential for drug discovery, development, and quality assurance during manufacturing. The company's business model benefits from recurring revenue streams through consumables and services, creating resilience against instrument demand fluctuations. Madison expects above-average long-term growth driven by expanding end markets including biopharmaceuticals, electric batteries, semiconductors, and water testing. Beyond core analytical instruments, Agilent is investing in high-growth diagnostics and genomics, particularly advanced gene sequencing and nucleic acid solutions for next-generation biopharmaceuticals. The managers capitalized on negative sentiment following moderating growth after strong recent performance, purchasing shares at a discount to intrinsic value despite the company's strong competitive position and growth prospects.

Pitch Summary:
We purchased shares in Texas Instruments and Agilent Technologies. Texas Instruments is a leading supplier of analog and embedded semiconductors which convert and amplify signals, manage and distribute power, and process data. It is a highly profitable business with a terrific growth runway, strong competitive advantages, and large opportunities for reinvestment at very attractive returns. The company combines considerable manufacturing scale with incredible intangible advantages across intellectual property derived from its engineering talent, and a reputation for meeting every customer need. We also like that its chips are very challenging for customers to re-specify once placed in a product and are a very low cost of the total value of the end product, a combination which creates considerable switching costs, in our view. This set of advantages has enabled Texas Instruments to generate returns on invested capital in the top decile of the S&P 500. As impressed as we are with the set of competitive advantages and culture at Texas Instruments, we are equally optimistic on the outlook for the end markets it serves. Automotive and industrial markets comprise nearly two-thirds of revenue and are increasingly embracing digital technologies. Common use cases include driver assistance, electric vehicles, factory automation, electric grid infrastructure, and smart home products – just to name a few. Texas Instruments' semiconductors enable these advancements of the analog economy, which we believe is still in the early stages. To capitalize on this long-term opportunity, Texas Instruments is embarking on an aggressive capital investment program to build out the internal manufacturing capacity to meet anticipated demand. While this is pressuring free cash flow in the near term, we believe these investments will generate very attractive returns on that capital outlay. The combination of weak demand in its consumer end markets combined with uncertainty regarding the capital investment plan created an opportunity to initiate a position in Texas Instruments during the quarter at a price below our assessment of intrinsic value.

BSD Analysis:
Madison initiated a position in Texas Instruments, viewing it as a leading analog and embedded semiconductor supplier with exceptional competitive advantages. The managers highlight TXN's strong moat through manufacturing scale, intellectual property, engineering talent, and high customer switching costs due to chip re-specification challenges and low cost relative to end products. These advantages have enabled top-decile returns on invested capital within the S&P 500. The investment thesis centers on secular growth in automotive and industrial end markets, which represent nearly two-thirds of revenue and are increasingly adopting digital technologies including driver assistance, electric vehicles, and factory automation. While TXN's aggressive capital investment program is pressuring near-term free cash flow, Madison believes these investments will generate attractive returns as the analog economy remains in early stages. The managers capitalized on weak consumer demand and capital investment uncertainty to purchase shares below intrinsic value.

Pitch Summary:
We added to Dollar Tree following the stock's weakness in the quarter. Investors are concerned over weaker than expected margins, primarily caused by a mix shift to consumable products (versus higher margin discretionary products) and high theft (or inventory 'shrink'). These dynamics have also been experienced by Dollar Tree's closest peer, Dollar General, and broadly across the retail landscape. While certainly not favorable in the short term, we view these as natural cyclical aspects of the retail industry that won't be sustained forever. However, more important to the long-term earnings power of the business, we are encouraged by some of the early results from the various initiatives management has in place. Namely, customer traffic has meaningfully increased at both the Dollar Tree and Family Dollar banners, driving solid market share gains and increased sales per square foot, which we believe to be one of the most important metrics to track the company's progress. With these promising early results, we used the cloud of cyclical headwinds to opportunistically add to our position.

BSD Analysis:
Madison increased their Dollar Tree position during Q3 weakness, viewing current margin pressures as cyclical rather than structural. The fund managers are encouraged by improving operational metrics, particularly customer traffic growth at both Dollar Tree and Family Dollar banners, which is driving market share gains and higher sales per square foot. Management acknowledges near-term headwinds from product mix shifts toward lower-margin consumables and elevated inventory shrink, issues affecting the broader discount retail sector. However, they believe these challenges are temporary cyclical factors that will normalize over time. The investment thesis centers on Dollar Tree's ability to execute strategic initiatives that are already showing early positive results in traffic and productivity metrics. Madison views the current valuation as attractive given the company's long-term earnings potential once cyclical pressures subside. The opportunistic addition reflects confidence in management's turnaround efforts and the resilience of the discount retail model during economic uncertainty.

Pitch Summary:
Hayward Holdings (HAYW) manufactures and distributes residential pool equipment largely in North America. The North American market is a duopoly and 80% of HAYW revenues are driven by repair and remodel versus new pool construction, mimicking recurring revenues, which we like. The company generates nearly 30% cash flow margins in an attractive market structure. The recent slowdown in home sales and renovations post-reopening provided a very attractive valuation and HAYW is poised to participate in the eventual recovery of the residential housing market.

BSD Analysis:
Madison views Hayward as an attractive investment in a concentrated market structure, operating within a North American duopoly that provides pricing power and competitive stability. The fund particularly values the company's revenue mix, with 80% coming from repair and remodel activities rather than new construction, creating a more predictable, recurring-like revenue stream. This defensive characteristic reduces cyclical volatility compared to pure new construction exposure. Madison highlights Hayward's exceptional cash flow generation of nearly 30% margins, demonstrating strong operational efficiency and pricing power within the favorable market structure. The fund sees the recent housing market slowdown as creating an attractive entry valuation rather than a fundamental concern. Madison anticipates Hayward will benefit from the eventual recovery in residential housing activity, positioning the investment for both defensive characteristics during downturns and upside participation in recovery cycles.

Pitch Summary:
Software provider J Frog (FROG) sells software tools to the Dev/Sec/Ops space (Development, Security and Operations). Their software forms a critical component of the software development chain. Essentially, large enterprises use FROG's tools to develop, secure and operate their software infrastructure. We believe J Frog is a very strategic asset that dominates its niche. The company is profitable, with recurring revenues that drive material cash flow, buttressed with a strong balance sheet.

BSD Analysis:
Madison views JFrog as a strategic asset with dominant positioning in the critical DevSecOps software development toolchain. The fund emphasizes the mission-critical nature of JFrog's platform for large enterprise customers who rely on their tools for software development, security, and operations. This positioning suggests high switching costs and customer stickiness, supporting pricing power and revenue visibility. Madison highlights JFrog's profitability and strong cash flow generation from recurring revenues, indicating a mature, well-executed SaaS business model. The company's strong balance sheet provides financial flexibility and reduces execution risk. The fund's characterization of JFrog as dominating its niche suggests limited competitive threats and potential for market share expansion. Madison's bullish stance appears driven by the combination of mission-critical software positioning, strong financial metrics, and the growing importance of DevSecOps tools in enterprise software development workflows.

Pitch Summary:
Ollies Bargain Outlet is a discount, closeout retailer. They acquire closeout branded merchandise, mostly hardgoods like air conditioners, home accessories, and other home goods, and sell them to shoppers at deep discounts, while maintaining a very healthy profit margin for themselves. Ollie's value proposition is resonating especially well during these inflationary times. Furthermore, the availability of quality closeout merchandise has rarely been this attractive, according to management. The company is delivering some of the best results in retailing, with material upside to sales and earnings driving the shares higher.

BSD Analysis:
Madison views Ollie's as exceptionally well-positioned in the current economic environment, with their discount closeout model resonating strongly during inflationary periods when consumers seek value. The company's business model of acquiring branded closeout merchandise and selling at deep discounts while maintaining healthy margins demonstrates operational excellence and pricing power. Management's commentary about attractive closeout merchandise availability suggests favorable supply dynamics that should support inventory acquisition and margins. Madison emphasizes that Ollie's is delivering some of the retail sector's best results, indicating strong execution and market share gains. The fund sees material upside potential in both sales and earnings, suggesting the company is capturing market opportunities effectively. The combination of a recession-resistant value proposition, favorable supply conditions, and strong operational execution appears to drive Madison's bullish conviction on the retailer's prospects.

Pitch Summary:
Model N provides software and services to the global life sciences industry. They have no meaningful competition, and their platform is considered the system of record for their customers, which includes marquee names like Moderna, Johnson and Johnson, Pfizer, and Abbot Labs. Over the last several years, the company successfully transitioned its customer base to a recurring revenue, cloud-based model, driving accelerated growth. With the transition largely in the rearview, the forward growth guidance disappointed investors, although, here again, we believe the issues are short term and the stock is very attractively priced.

BSD Analysis:
Madison highlights Model N's dominant competitive position in life sciences revenue management software, emphasizing the company's lack of meaningful competition and status as the system of record for blue-chip pharmaceutical clients. The customer roster including Moderna, Johnson & Johnson, Pfizer, and Abbott Labs demonstrates the mission-critical nature of Model N's platform and high switching costs. The fund views the successful transition to a cloud-based, recurring revenue model as a significant strategic achievement that has driven accelerated growth and improved business quality. While recent forward guidance disappointed investors and pressured the stock, Madison believes these are temporary issues rather than fundamental problems. The fund sees the current valuation as attractive, suggesting the market has overreacted to near-term guidance concerns. Madison's bullish stance appears based on the company's entrenched market position, high-quality customer base, and the defensive characteristics of mission-critical software in the pharmaceutical industry.

Pitch Summary:
Magnite (MGNI) provides the underlying technology that makes advertising online possible. It is poised to capitalize on the massive shift in advertising dollars that is taking place, away from linear TV (Broadcast, Cable, and Satellite) to Connected TV or CTV (ad supported streaming services like Netflix and Hulu). Although the opportunity is large, it is still early in the game, and the company is experiencing some near-term growing pains as their outlook for the balance of the year disappointed investors due to the writers and actors strike. The UAW strike also impacted auto advertisement. We believe these are short-term issues and MGNI's competitive position is getting stronger.

BSD Analysis:
Madison views Magnite as well-positioned to benefit from the secular shift in advertising spend from traditional linear TV to Connected TV (CTV) platforms. The fund recognizes this as a massive, multi-year opportunity that's still in early stages, providing significant runway for growth. While near-term performance disappointed due to external factors including Hollywood strikes affecting content production and UAW strikes reducing automotive advertising spend, Madison considers these temporary headwinds rather than structural challenges. The fund believes Magnite's competitive moat is actually strengthening during this transition period, likely due to their technology platform's critical role in programmatic advertising infrastructure. Madison's bullish thesis centers on the company's ability to capture share of the accelerating shift toward streaming and digital advertising. The fund appears confident that once these transitory disruptions resolve, Magnite will demonstrate the underlying strength of its market position and growth trajectory.

Pitch Summary:
GOGO Inc., Magnite Inc., and Model N Inc. were our weakest performers in the quarter. GOGO is a ground-to-air internet service provider for private jets. Unfortunately, GOGO's subscriber numbers were hurt by the many planes grounded for deferred maintenance in the quarter. During these maintenance periods, GOGO typically pauses the subscription for its clients. GOGO also pushed back its rollout of 5G service due to an error in its chip design. Neither of these issues violates our 5-pillar analysis of GOGO and we believe the company will still generate prodigious free cash flow over the next several years, which we expect to drive the stock higher.

BSD Analysis:
Madison maintains a bullish stance on GOGO despite near-term headwinds that caused underperformance in Q3. The fund views the company's subscriber decline as temporary, driven by deferred aircraft maintenance that led to subscription pauses rather than fundamental business deterioration. While the 5G rollout delay due to chip design errors represents an operational setback, management believes these issues don't compromise their core investment thesis. The fund's confidence stems from their proprietary 5-pillar analysis framework, which apparently remains intact for GOGO. Madison expects the company to generate substantial free cash flow over the coming years, driven by the essential nature of connectivity services for private aviation. The fund anticipates this cash generation will ultimately drive share price appreciation as operational challenges resolve. Their conviction suggests GOGO maintains a strong competitive position in the niche but growing business aviation connectivity market.

Pitch Summary:
We recently purchased a position in Texas Instruments (TI). TI is a leading global supplier of analog and embedded semiconductors. In contrast to many digital semiconductor companies, TI's products can remain in demand for decades and are thus less exposed to obsolescence or product cycle risk. TI's chips also comprise a very low percentage of the total cost of the end product allowing the company to routinely generate margins and returns on capital in the top decile of the S&P 500. We believe increasing analog and embedded content growth in Automotive and Industrial will allow TI to grow at a faster pace than in the previous decade.

BSD Analysis:
The manager initiated a new position in Texas Instruments, emphasizing the company's differentiated business model in analog and embedded semiconductors that provides superior durability compared to digital semiconductor peers. TI's products enjoy decades-long demand cycles, creating significant protection against obsolescence and product cycle volatility that plagues other semiconductor companies. The company's chips represent a minimal percentage of end-product costs, enabling exceptional pricing power and consistently generating top-decile margins and returns on capital within the S&P 500. The automotive and industrial end markets are experiencing accelerating analog and embedded content growth, positioning TI for faster growth than the previous decade. This secular trend toward increased electronic content in vehicles and industrial applications provides multi-year growth visibility. The combination of defensive characteristics and growth acceleration makes TI an attractive long-term investment with superior capital efficiency.

Pitch Summary:
Alphabet continued to act well during the third quarter. Google's second quarter was better than expected and showed both ad stabilization as well as progress on its cost structure. We continue to like Google's position in Artificial Intelligence (AI), which it has been investing in and using across its core Search business, YouTube, and its ad quality systems. Google's Cloud business is also expected to benefit as businesses expand their use of generative AI.

BSD Analysis:
The manager maintains a bullish view on Alphabet, highlighting the company's better-than-expected second quarter results that demonstrated advertising market stabilization and meaningful cost structure improvements. Google's strategic positioning in artificial intelligence represents a significant competitive advantage, with AI integration across core Search, YouTube, and advertising quality systems driving operational efficiency and user experience. The Cloud business is positioned to capitalize on the generative AI adoption wave as enterprises increase their AI infrastructure spending. This creates multiple revenue growth vectors from both traditional advertising recovery and emerging AI-driven services. The combination of cost discipline and AI leadership provides both defensive characteristics and growth acceleration potential. Google's integrated AI approach across its ecosystem creates sustainable competitive moats and pricing power in high-growth markets.