Investment Pitches

Pitch Summary:
Jacobs was up nicely during the third quarter. The stock responded well to an in-line quarter with Federal Infrastructure and reshoring tailwinds continuing to benefit its outlook. The Critical Mission Solutions (CMS) business will be spun out or sold in 2024. Along with this spin-out, management has highlighted opportunities to optimize its People & Places Solutions business.

BSD Analysis:
The manager expresses confidence in Jacobs Solutions, citing strong performance driven by federal infrastructure spending and reshoring trends that provide sustained tailwinds. The company delivered an in-line quarter while benefiting from structural macro themes supporting long-term growth. The planned 2024 spin-out or sale of the Critical Mission Solutions business represents a significant value-unlocking catalyst that should improve focus and operational efficiency. Management's commitment to optimizing the People & Places Solutions segment indicates additional operational improvements ahead. The infrastructure and reshoring themes align with multi-year government spending cycles and supply chain reconfiguration trends. This positioning in essential infrastructure services provides defensive characteristics with growth upside. The corporate restructuring initiatives should drive margin expansion and shareholder value creation.

Pitch Summary:
Eli Lilly again moved higher in the third quarter. The stock has continued to be fueled by its diabetes franchise, in particular Mounjaro, which has been approved for use in diabetes but is also expected to be approved in obesity later this year. We are also waiting for approval of donanemab for Alzheimer's which should occur by year end.

BSD Analysis:
The manager maintains a bullish stance on Eli Lilly, highlighting the company's strong diabetes franchise momentum driven by Mounjaro's success. The drug has already secured diabetes approval and is positioned for obesity indication approval, representing significant market expansion potential. The pending donanemab approval for Alzheimer's treatment adds another major catalyst expected by year-end. This dual-pipeline approach in high-growth therapeutic areas demonstrates Lilly's innovation capabilities and diversified revenue streams. The manager's confidence is reinforced by the stock's continued outperformance during the quarter. The diabetes and obesity markets represent massive addressable opportunities with strong pricing power. Multiple near-term catalysts position the company for sustained growth acceleration across key therapeutic franchises.

Pitch Summary:
We have also sought to add growth companies with less earnings variability than the overall market. New purchase Starbucks, the largest global coffee chain, fits this description. We view Starbucks as a quality compounder with strong free cash flow, operating in a segment and in dayparts that are very much routine-based and habitual, balancing the business's exposure to discretionary spending. Additionally, Starbucks is still in the early stages of its reinvention plan to help accelerate revenue growth over the next several years on the back of better same store sales and unit growth. Coupled with the benefits of margin expansion, we believe the company can drive double-digit EPS growth at scale.

BSD Analysis:
The managers view Starbucks as a defensive growth investment that combines earnings stability with meaningful expansion potential. They emphasize the company's position as the world's largest coffee chain with strong free cash flow generation and lower earnings volatility than broader markets. The investment thesis centers on Starbucks' habitual consumption patterns and routine-based customer behavior that provides resilience during economic uncertainty. The managers highlight the company's reinvention strategy as a key growth driver, expecting accelerated revenue growth through improved same-store sales and unit expansion. They project double-digit EPS growth driven by both revenue acceleration and margin expansion initiatives. This positioning reflects a search for quality growth companies that can deliver consistent performance across economic cycles. The combination of defensive characteristics with growth potential makes Starbucks attractive in an uncertain macro environment. The managers appear confident in management's execution of the strategic reinvention plan.

Pitch Summary:
Union Pacific also falls in our cyclical bucket of companies working through short-term headwinds. The rail operator provides the added benefit of a low correlation to the rest of the portfolio. As an efficient way to transport grain, coal and autos and with networks that extend from Mexico through the U.S. to Canada, the freight rail industry generates high returns on invested capital and is positioned to benefit from reshoring. We have been researching rails for the last 18 months, waiting for earnings estimates to come down amidst a weakening macro backdrop. By the start of the third quarter we believe estimates had declined enough to make us comfortable in establishing exposure. We chose Union Pacific as its risk-reward is compelling if the turnaround being led by new CEO Jim Vena is successful. Rail volumes are coincident with macro conditions, causing us to establish a minimal position that can be built opportunistically.

BSD Analysis:
The managers view Union Pacific as an attractive cyclical investment positioned for recovery under new leadership while providing portfolio diversification benefits. They highlight the rail industry's structural advantages including high returns on invested capital and extensive North American transportation networks spanning from Mexico to Canada. The investment thesis incorporates long-term secular trends like reshoring that should benefit freight rail transportation. The managers demonstrate patience and discipline, having researched the sector for 18 months while waiting for earnings estimates to reset lower. They specifically chose Union Pacific based on the compelling risk-reward profile under new CEO Jim Vena's turnaround efforts. The initial minimal position size reflects the cyclical nature of rail volumes and macro sensitivity, allowing for opportunistic additions as conditions improve. This represents a contrarian entry point in a high-quality industrial franchise during a period of earnings pressure.

Pitch Summary:
Big box retailer Target provides early-cycle consumer exposure, but with support from cash flow and a dividend. Target reset earnings in August by lowering its full-year outlook to account for weak sales and one-time cost issues, leaving its shares trading at a historically wide discount to peers Wal-Mart and Costco. We see the company as a turnaround story, with better-than-expected margin and inventory controls leading to improved comparisons. In addition, we view the controversy around Target's Pride merchandise assortment, and consequent backlash, to be fixable. A deeper-than-expected downturn in consumer spending and a failure to reverse traffic declines and recent market share losses are risks to our thesis, but we believe they are sufficiently accounted for in the stock's current valuation.

BSD Analysis:
The managers view Target as an attractive turnaround opportunity trading at a significant discount to retail peers following earnings disappointments and operational challenges. They position Target as providing early-cycle consumer exposure with defensive characteristics through its dividend and cash flow generation. The investment thesis centers on operational improvements including better margin and inventory management that should drive earnings recovery. The managers acknowledge the Pride merchandise controversy but view it as a manageable, temporary issue rather than a fundamental business problem. They recognize key risks including potential consumer spending deterioration and continued market share losses, but believe current valuation adequately reflects these concerns. The historically wide discount to Walmart and Costco suggests meaningful upside potential if the turnaround succeeds. This represents a contrarian bet on management's ability to execute operational improvements while navigating a challenging consumer environment.

Pitch Summary:
Shares of Nvidia, the clear leader in supplying graphics processing units to power AI applications, finished the quarter on an upswing and remain substantially higher for the year. Nvidia's multiple has actually compressed year to date due to better-than-expected earnings growth and, while we remain confident in the company's long-term growth trajectory, we trimmed the position for the third time this year to manage our overall portfolio risk.

BSD Analysis:
The managers maintain strong conviction in NVIDIA's long-term prospects while actively managing position size due to concentration risk. They recognize NVIDIA as the dominant player in AI-focused GPU technology, a critical infrastructure component for artificial intelligence applications. Despite the stock's substantial year-to-date gains, the managers note that valuation multiples have actually compressed due to earnings growth exceeding stock price appreciation. This suggests the company is growing into its valuation rather than becoming overextended. The decision to trim the position for the third time reflects disciplined portfolio management rather than diminished conviction in the investment thesis. The managers balance their confidence in NVIDIA's competitive positioning and growth trajectory with prudent risk management. Their approach demonstrates sophisticated portfolio construction while maintaining exposure to a key AI beneficiary. The continued holding after multiple trims indicates enduring belief in the company's fundamental strength and market leadership position.

Pitch Summary:
Despite showing progress on subscriber growth and margin expansion in its second-quarter results, streaming provider Netflix reported disappointing average revenue per user (ARPU) numbers which weighed on the shares. The company continues to make progress in rolling out its ad-supported tiers and cutting down paid sharing and we believe it remains well-positioned to see ARPU inflect higher in the coming quarters.

BSD Analysis:
The managers maintain a bullish stance on Netflix despite near-term ARPU headwinds that pressured the stock during Q3. They view the disappointing ARPU metrics as temporary, highlighting the company's progress in subscriber growth and margin expansion. The investment thesis centers on Netflix's strategic initiatives including the rollout of ad-supported subscription tiers and efforts to reduce password sharing, both of which should drive ARPU recovery. The managers believe these operational improvements position Netflix well for revenue per user inflection in upcoming quarters. This represents a contrarian view given the stock's underperformance during the quarter. The pitch reflects confidence in Netflix's execution of its monetization strategy despite current market skepticism. The managers appear to view current weakness as a temporary setback rather than a fundamental deterioration in the business model.

Pitch Summary:
Gilead is a large biopharmaceutical company we have long followed given its dominant position in HIV treatment and strong intellectual property position. With pandemic-induced distortions on quarterly financials largely in the rearview mirror (Veklury — aka Remdesivir — was an overnight success as an antiviral treatment of COVID), we believe Gilead's organic revenue growth potential over the next many years is in the mid-single digits. Gilead's growth should be stable, as the company has no major patent expirations until the early 2030s. While less growthy than some high-flying drug classes (e.g., diabetes/obesity), Gilead's current valuation is undemanding, with a P/E barely in the double digits. We tend to shy away from health care investments whose valuation is dependent on pipeline drugs transforming into a large commercial opportunity, given the uncertain nature of drug discovery and the binary characteristic of the stock reactions. In Gilead's case, we believe the market is ascribing virtually no value to its existing pipeline, in effect providing us with a "free" call option. Lastly, Gilead's 4% (and growing) coupon should offer considerable downside support amid a more challenging market backdrop.

BSD Analysis:
The managers present a compelling value-oriented bull case for Gilead Sciences, emphasizing the company's dominant HIV treatment franchise and strong intellectual property moat. With COVID-related Remdesivir distortions now behind them, they project stable mid-single digit organic growth with no major patent cliffs until the early 2030s. The valuation appears attractive with a P/E "barely in the double digits," contrasting with high-flying biotech sectors. The managers appreciate Gilead's established revenue base rather than pipeline-dependent valuations, noting the market assigns "virtually no value" to the existing pipeline, creating a "free call option." The 4% and growing dividend yield provides downside protection in challenging markets. This conservative approach aligns with their preference for predictable cash flows over binary drug development outcomes, making Gilead an attractive defensive healthcare play with potential upside from undervalued pipeline assets.

Pitch Summary:
During the quarter we initiated positions in two new names: T-Mobile and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile's strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile's annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while still generating compelling profitability and returns. This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its post-paid subscriber base by about 22%. Over the same period, AT&T's has grown by about 14%, while Verizon's by less than 5%. Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in around $13.5 billion, up from less than $8 billion last year. In 2024 free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today's stock price. We have long admired T-Mobile, but until recently the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly thereafter. The initial yield is about 2% and it is expected to grow about 10% per year.

BSD Analysis:
The managers present a strong bull case for T-Mobile as the "best-in-class player in the wireless space" with superior competitive positioning. T-Mobile's advantaged spectrum holdings enable better service delivery at significantly lower costs, with annual capex of $10 billion versus peers spending roughly double. This cost advantage allows aggressive pricing while maintaining strong profitability and returns. Post-Sprint merger execution has been exceptional, with 22% post-paid subscriber growth over three years versus AT&T's 14% and Verizon's sub-5% growth. The high fixed-cost wireless business model creates operating leverage, driving free cash flow from under $8 billion to an expected $13.5 billion in 2023 and $17 billion in 2024. The 10% free cash flow yield based on current stock price is compelling, enhanced by the inaugural 2% dividend with expected 10% annual growth. The managers' long-term admiration for the company and immediate purchase following dividend initiation demonstrates high conviction in the investment thesis.

Pitch Summary:
On the downside, shares of industrials company RTX underperformed significantly. On July 25 RTX announced it had discovered a manufacturing defect in some of its jet engines. RTX would have to ground the engines, replace the parts and reimburse the airlines for the downtime. While this development weighed on the stock, our active management of the position meaningfully reduced the size of the blow. Earlier in July we had significantly trimmed our position to reflect some cyclical risks, so we were relatively less exposed when shares sold off following the announcement. When RTX delayed a scheduled update in early September, we interpreted it as a modestly negative development and further pared our position. When the update came, the stock sold off significantly on news the debacle would amount to around $3 billion over three years — the high end of investor expectations. As we sit here today, we think the market's reaction to RTX is likely overdone. $3 billion is a large sum, but the company's market cap has declined over $30 billion since first releasing the news in late July. While this is a black eye for the company and will create headwinds for some time, we think it likely that the current level will mark a durable low and see opportunities to add back a small amount of the RTX we sold at higher prices earlier in the summer.

BSD Analysis:
The managers present a balanced view of RTX following a significant manufacturing defect in jet engines that required grounding, part replacement, and airline reimbursements. Their proactive position management demonstrated strong risk control, having trimmed the position in early July due to cyclical concerns before the announcement. The $3 billion cost over three years represents the high end of expectations, but the managers argue the market reaction appears excessive given the $30 billion market cap decline. While acknowledging this creates a "black eye" and ongoing headwinds, they view current levels as potentially marking a durable low. The managers' neutral stance reflects both the operational challenges facing RTX and their belief that the market has overcorrected, creating potential opportunities to selectively add back exposure at more attractive valuations.

Pitch Summary:
In financials, shares of Apollo, a longtime holding of ours, were particularly strong in the third quarter and served as a major contributor to overall performance. Apollo is the classic example of taking 10 years to become an "overnight success." In 2009 Apollo invested a de minimus amount of money in Athene, a start-up retirement services company, and became the asset manager for Athene's investment portfolio. Athene sells fixed annuities: straightforward retirement products that offer guaranteed payments to their policy holders. The Global Financial Crisis had devastated the annuity industry and Athene's founders spied opportunity. While traditional players were sidelined, Athene entered the market with a clean balance sheet and no legacy liabilities. Fast forward 14 years, and Athene is now the largest issuer of fixed annuities and one of the largest competitors in the space. Athene sold $3 billion in policies annually 10 years ago and is on track to sell over $60 billion this year. As Athene's franchise has grown, Apollo's asset management business and earnings have soared. In the last six months, investors have finally begun to admire what we have long seen in Apollo: a uniquely powerful franchise, positioned to compound earnings in the teens and yet trading at a modest valuation. Apollo is up 58.8% since mid-March and rose 16.9% in the third quarter, and yet still trades at a P/E of just 11.8x. Earnings growth alone should continue to power shares higher. We believe Apollo's multiple could expand meaningfully as well.

BSD Analysis:
The managers present a compelling bull case for Apollo Global Management, highlighting the company's transformation through its strategic investment in Athene. Apollo's asset management business has benefited tremendously from Athene's growth from $3 billion to $60 billion in annual policy sales over the past decade. The managers emphasize Apollo's "uniquely powerful franchise" with earnings positioned to compound in the teens, yet trading at an attractive 11.8x P/E multiple. Despite strong recent performance (up 58.8% since mid-March), the managers believe the valuation remains modest and see potential for multiple expansion. The pitch demonstrates Apollo's successful long-term strategy in building a retirement services powerhouse through Athene, creating a durable competitive advantage in the alternative asset management space. The managers' confidence is reinforced by their long-term holding period and deep understanding of the business model transformation.

Pitch Summary:
We initiated a position in American Software, Inc. (Ticker: AMSWA), the owner of supply chain planning software Logility. This software enables digital supply chain optimization with the most popular use case in product demand planning and primarily services consumer goods, food and beverage, and retail customers who are managing business-to-consumer (B2C) supply chains. This business generates lots of cash, boasts high returns on invested capital (ROIC), and is very sticky – once you train your team on the software and have all your relevant inputs embedded in the program, you are unlikely to switch. This business trades at a discount to its peer set for reasons that stem from the founder's controlling B-class shares in the company. He is 88 years old. The company has been overly conservative with its balance sheet, under-investing in growth and dragging its feet on acquisitions. Demand for supply chain software has surged following Covid, and yet this company continues to pay a dividend. Furthermore, the niche that Logility services is going through a goods recession. They are seeing sales cycles elongate while they are trying to move customers to the cloud. The investment community has punished the stock so far in 2023. We see a catalyst to resolving these issues as the company publicly stated that they are conducting a process to convert the B shares of Founder Jim Edenfield into A shares. We have engaged with management on how to conduct the process and believe the resolution of this share conversion will eliminate a large overhang on the stock and enable a much more efficient use of capital going forward. We are already seeing signs of progress with a recent acquisition, a divestiture of a non-core business, and the adoption of a 10b5-1 trading plan for a share repurchase program. This company ultimately operates in a dynamic and fast growing industry that is consolidating. With the removal of Edenfield's control, we see a sale to a larger player as a potential outcome.

BSD Analysis:
The manager initiated a position in American Software, recognizing the exceptional quality of its Logility supply chain planning software business. The software serves critical demand planning functions for consumer goods, food & beverage, and retail companies, creating high customer stickiness once implemented. The business model generates strong cash flows and high returns on invested capital, reflecting the mission-critical nature of supply chain optimization software. The current discount to peer valuations stems from governance issues related to 88-year-old founder Jim Edenfield's controlling B-class shares, which has led to conservative capital allocation and underinvestment in growth. Despite surging demand for supply chain software post-COVID, the company has maintained dividend payments rather than investing aggressively in expansion. The key catalyst is the announced process to convert Edenfield's B-shares to A-shares, which should eliminate the governance overhang and enable more efficient capital allocation. Early signs of progress include recent acquisitions, divestitures, and share repurchase programs, suggesting improved capital discipline. The combination of a high-quality business trading at a discount with a clear catalyst for governance improvements creates an attractive investment opportunity with potential acquisition upside.

Pitch Summary:
DLH Holdings Corp. (Ticker: DLHC) is a consultant that provides a wide range of public health and life sciences services to various Federal health agencies such as the Veterans Administration and Centers for Disease Control. It has added high margin cybersecurity capabilities via its acquisition of Grove Resources last year. This is an asset-lite, high free cash flowing business with generally sticky 3 to 5-year contracts. This company trades at a discount to its peers—despite having best in class margins—largely due to an overhang for a high revenue but low margin contract that comes up for renewal in the coming months. Our research indicates the stock is priced for a "worst case" scenario with respect to this renewal, and other likely outcomes present a high-upside case. Furthermore, management has been astutely using cash to acquire smaller players in adjacent capabilities—such as Grove—to diversify revenue across more contracts. CEO Zach Parker came in seven years ago when the company was doing $2m in EBITDA; they will generate somewhere between $30m to $35m this year. DLHC was a top performer in the third quarter as the management team continues to execute on its strategy and positions the company to be sold to a larger player.

BSD Analysis:
The manager views DLH Holdings as an undervalued government services contractor with exceptional operational metrics and growth trajectory. The company's focus on public health and life sciences services to federal agencies provides stable, recurring revenue through sticky 3-5 year contracts. The recent acquisition of Grove Resources has enhanced margins by adding high-value cybersecurity capabilities to the service portfolio. Despite best-in-class margins, the stock trades at a discount due to concerns about a low-margin contract renewal, which the fund believes creates a compelling risk-reward opportunity. The manager's research suggests the market is pricing in a worst-case renewal scenario, while more likely outcomes offer significant upside potential. CEO Zach Parker's track record is impressive, growing EBITDA from $2 million to $30-35 million over seven years through strategic acquisitions and operational excellence. The asset-light, high free cash flow model combined with contract diversification reduces business risk while maintaining growth optionality. The fund views DLHC as an attractive acquisition target for larger players, providing additional upside potential beyond operational improvements.

Pitch Summary:
E.W. Scripps (Ticker: SSP) was a detractor in the quarter on concerns about the general economy and ad market, as well as the world of "strikes" which can affect the desire of auto companies to advertise and the ability to produce "scripted" television and movies. We think all these issues define "cyclical and temporary", and we aggressively added to our position to make this a Top 5 position. Scripps has done a very nice job of positioning itself to capitalize on the evolution of the media industry. We think "legacy" TV has much longer life to it than "fancy talk" suggests, and despite obvious exposure to the cyclicality of the advertising business at large, Scripps is a cash gusher that is rapidly paying down debt from a series of acquisitions that were enabled under the prior administration. Pick your favorite math, but ours suggests that free cashflow to pay down debt is creating 30% annualized increases in equity value at current levels. We have had different exposures to SSP over the last decade - ranging from zero to our current Top 5 position.

BSD Analysis:
The manager maintains strong conviction in E.W. Scripps despite near-term headwinds from economic concerns, advertising market weakness, and industry strikes affecting content production. The fund views these challenges as cyclical rather than structural, aggressively adding to make SSP a Top 5 position during market weakness. Management's strategic positioning to capitalize on media industry evolution provides competitive advantages that the market is overlooking. The manager disputes pessimistic views about legacy television, believing it has significantly more longevity than consensus expects. The compelling financial thesis centers on Scripps generating substantial free cash flow that is rapidly deleveraging the balance sheet from previous acquisitions. The fund calculates that debt reduction is creating approximately 30% annualized increases in equity value at current trading levels, representing exceptional value creation. The manager's willingness to vary position sizing from zero to Top 5 over the past decade demonstrates tactical flexibility while maintaining long-term conviction. The combination of strong cash generation, debt reduction, and strategic positioning creates an attractive investment opportunity despite cyclical headwinds.

Pitch Summary:
Also under "off spreadsheet," we did not model for a giant cyber-hack of MGM Resorts (Ticker: MGM), of which our holding IAC Inc. (Ticker: IAC) owns 18% - their largest value driver. The cybersecurity breach froze MGM's reservation system late in September 2023, generally making a mangle of things. Both stocks dropped accordingly. Angi (Ticker: ANGI), of which IAC owns 85%, reported a year-over-year revenue decline as Joey Levin (now full-time CEO of both IAC and Angi) focuses the company on more profitable business and retention...much to our delight. Dotdash Meredith remains mired in an ad recession as it continues its work onboarding the Meredith print properties to its digital monetization machine. We view these challenges as annoying but temporary and the current market reaction as overly punitive. IAC currently trades $125m above the combined value of its cash, MGM, and Angi positions. At the current price, you "get" 31% of car-sharing marketplace Turo, the equity of publishing giant Dotdash Meredith, Care.com, Vivian Health, and other IAC companies announced for…$125m. Yes, we have taken this opportunity to add to our position.

BSD Analysis:
The manager views IAC as significantly undervalued following temporary setbacks including the MGM cyber-attack that impacted their largest value driver. Despite near-term headwinds from Angi's revenue decline and Dotdash Meredith's ad recession challenges, the fund sees these as cyclical issues rather than structural problems. The manager expresses confidence in CEO Joey Levin's strategic focus on profitability and retention at Angi, viewing this operational discipline positively. The compelling valuation thesis centers on IAC trading at only $125 million above the sum of its cash, MGM stake, and Angi position, effectively valuing a diverse portfolio of digital assets at minimal cost. The fund calculates that investors receive 31% of Turo, Dotdash Meredith, Care.com, Vivian Health, and other subsidiaries for just $125 million, representing exceptional value. The manager's decision to add to the position during market weakness demonstrates conviction in the sum-of-the-parts valuation opportunity. The temporary nature of current challenges combined with the substantial discount to intrinsic value creates an attractive risk-adjusted investment opportunity.

Pitch Summary:
That Viasat (Ticker: VSAT) launched the first of its 3 satellite network flawlessly only to have a Northrup antenna fail - the first failure in 13 deployments- was not part of our investment narrative. While most costs are fully insured, the math on the actual cashflow produced by a giant increase in service capacity is pushed out to the right by at least 18 months. That is not a good thing. Now what are the odds that Inmarsat, which recently merged into Viasat, suffered what is likely to be a total failure after launch - the first in its 40-year history? Again, the satellite was insured for costs, but the delays clearly delayed a cashflow inflection point and thus decreased our present value. Yes, we did increase our position and made Viasat our largest position prior to these launches. And yes, we sold 30% of the position in between launches to reflect a change in the time value of our money, and it became merely a "Top Ten" position. And yes, the stock is stupid, stupid cheap with immense strategic value in a world of "more space." The stock wakes up every day without memory and seeks to discount the future…and thus we endeavor to analyze the future in a probabilistic way, and weight positions appropriately given the risk / return balance. We think Viasat is a very good bet from here, just not our best, highest-conviction bet. We have taken tax losses in taxable accounts, but you will see this position back in portfolios again shortly after month end.

BSD Analysis:
The manager maintains a bullish stance on Viasat despite significant operational setbacks including satellite antenna failures that have delayed cash flow inflection by 18 months. The fund initially made VSAT their largest position but prudently reduced exposure by 30% following the technical failures, demonstrating disciplined risk management. The manager emphasizes the stock's compelling valuation, describing it as "stupid, stupid cheap" with substantial strategic value in an expanding space economy. Despite the near-term headwinds from delayed satellite deployments, the fund views these issues as temporary setbacks rather than fundamental problems. The manager's decision to harvest tax losses while planning to re-enter the position shortly after month-end suggests continued conviction in the long-term thesis. The probabilistic approach to position sizing reflects sophisticated risk management given the binary nature of satellite deployment outcomes. The strategic value of Viasat's assets in the growing space economy provides a compelling long-term investment rationale despite current execution challenges.

Pitch Summary:
Cisco Systems (U.S.) is the leading networking solutions company. Networking equipment gains importance as businesses modernize their IT infrastructure, and Cisco is well positioned to capture this demand with the broadest portfolio and the most effective go-to-market strategy. Cisco is changing its business from selling mainly transactional hardware to more software and subscriptions. This transition is expected to accelerate growth, improve operating margins and build recurring revenue. Despite these notable business improvements, Cisco still trades near a trough valuation relative to the S&P 500 Index. More recently, Cisco announced its intention to acquire Splunk, a leader in security and observability, adding to its already strong position in the increasingly important security market. At a low-teens multiple of our estimate of normalized earnings, we think Cisco is trading at an attractive discount to our estimate of its intrinsic value.

BSD Analysis:
The manager views Cisco as a compelling value opportunity benefiting from secular IT modernization trends while trading at trough valuations despite significant business model improvements. The investment thesis rests on Cisco's dominant market position with the broadest networking portfolio and most effective go-to-market strategy, positioning it to capture increasing demand as businesses modernize IT infrastructure. The critical transformation from transactional hardware sales to software and subscriptions represents a fundamental business quality improvement that should accelerate growth, expand operating margins, and create more predictable recurring revenue streams. Despite these positive developments, the stock trades near historical valuation troughs relative to the S&P 500, creating an attractive risk-adjusted opportunity. The proposed Splunk acquisition strategically enhances Cisco's position in the rapidly growing security and observability market, adding to an already strong security portfolio. At low-teens multiples of normalized earnings, the manager sees significant upside to intrinsic value estimates. This represents a classic value play where business model transformation and market leadership aren't reflected in current valuations.

Pitch Summary:
Brunswick (U.S.) is the leading manufacturer of marine engines, boats, and related parts and accessories. The company is commonly viewed as a cyclical boat manufacturer. The business has evolved in recent years, however, and now most of its profits come from its outboard engine business as well as its aftermarket parts and accessories segments. These are high-quality businesses in which Brunswick has material competitive advantages and they generate high returns on invested capital. The Mercury outboard business is the crown jewel. Over the past decade, Mercury has taken advantage of its leading scale to fund large investments in R&D and product development. These investments have driven consistent market share gains and enabled Mercury to carve out a dominant position in the fast-growing, high-horsepower part of the outboard market. Meanwhile, Brunswick has grown its parts and accessories business through attractive acquisitions that benefit from its broad-based distribution. The combination has shifted the business mix toward more resilient and faster growing profit streams that we believe are underappreciated today. Investors' recession fears and erroneous perception that Brunswick is a stale business have provided us with an opportunity to buy this high-quality franchise at a single-digit multiple of our estimate of mid-cycle earnings power. In our view, this is an attractive price for such a strong franchise.

BSD Analysis:
The manager presents Brunswick as a misunderstood transformation story where the market incorrectly views it as a cyclical boat manufacturer rather than recognizing its evolution into a high-quality marine franchise. The investment thesis centers on business mix transformation toward more resilient revenue streams, particularly the Mercury outboard engine business and aftermarket parts/accessories segments that generate high returns on invested capital. Mercury represents the "crown jewel" with a decade of R&D investments creating sustainable competitive advantages and market share gains in the fast-growing high-horsepower segment. Strategic acquisitions in parts and accessories leverage Brunswick's broad distribution network, further enhancing the business quality. The manager emphasizes that most profits now derive from these higher-quality, less cyclical segments rather than boat manufacturing. Market misperception and recession fears have created an attractive entry point at single-digit multiples of mid-cycle earnings power. This represents a classic value opportunity where fundamental business improvement is masked by outdated investor perceptions and cyclical concerns.

Pitch Summary:
Oracle (U.S.), a global software company, was the Fund's top contributor for the fiscal year, with its share price rising primarily after reporting its fiscal fourth-quarter results. More recently, Oracle announced fiscal first-quarter results, which were in line with consensus expectations. The drivers of the core business are performing well, in our view, and management expressed confidence that annual revenue growth will accelerate as planned based on demand trajectory and its strong bookings trends. For the quarter, total revenue increased 8% in constant currency (9% reported), and operating income grew 12% with margins showing improvement. Cloud and support revenue grew 11% in constant currency, powered by Fusion +20% and Netsuite +21%. The "strategic back office cloud" is now up to $6.9 billion in run-rate revenue. Infrastructure cloud and support revenue grew 14% in constant currency, powered by infrastructure cloud services +72% ex-legacy hosting services to $5.6 billion in run-rate revenue. Momentum is continuing to build as Oracle signed several deals for its cloud business greater than $1 billion in total value during the quarter and booked an additional $1.5 billion in the first week of the second quarter. We continue to believe Oracle is an attractive holding and undervalued due to our perception of its intrinsic value.

BSD Analysis:
The manager presents a compelling bull case for Oracle based on accelerating cloud transformation and strong operational momentum across key business segments. Revenue growth of 8% in constant currency demonstrates solid execution, while 12% operating income growth with margin expansion indicates effective cost management and operating leverage. The cloud transition is gaining significant traction with infrastructure cloud services growing 72% excluding legacy hosting, reaching $5.6 billion in run-rate revenue. Strategic applications like Fusion and NetSuite are showing exceptional growth at 20%+ rates, driving the strategic back office cloud to $6.9 billion in run-rate revenue. Large deal momentum is particularly impressive with multiple billion-dollar cloud contracts signed during the quarter and an additional $1.5 billion booked in early Q2. Management's confidence in accelerating revenue growth appears well-founded given strong demand trajectory and robust bookings trends. The manager views Oracle as undervalued relative to intrinsic value, suggesting the market hasn't fully recognized the successful cloud transformation and improving business quality.

Pitch Summary:
St. James's Place (U.K.), the largest wealth manager in the U.K., was the Fund's largest detractor for the quarter. St. James's Place released weak first half of 2023 results, and management noted that it will reduce fees on certain products ahead of the new consumer duty regulation. St. James's Place plans to cap annual product management charges at 85 basis points for client bond and pension contributions after a client has been invested for 10 years, which will result in a four basis point impact to the group revenue margin. CEO Andrew Croft also believes this self-directed decision will create goodwill with the regulatory body. Both assets under management and cash earnings were slightly below our expectations, and the relatively low amount of net new money was mainly attributed to weak flows in unit trusts and individual savings accounts. Gross contributions within the unit trusts and individual savings accounts have been concentrated in lower value accounts, and these clients have been most impacted by cost-of-living pressures. Further, clients' decision to allocate more money to cash products instead of traditional investments has put additional pressure on St. James's Place as it does not have a cash management product. Lastly, market performance was lower than our estimates due to a strengthening British pound compared to the U.S. dollar. Despite these near-term headwinds, we continue to believe the company offers an attractive long-term investment. Pension reforms in the U.K. have significantly increased the number of defined contribution participants, which benefits St. James's Place by providing a sustained flow of new clients and assets under management that we believe will continue. We also like that the company's capital-light operating model generates a higher than average return on capital employed and robust cash conversion, the majority of which gets returned to shareholders.

BSD Analysis:
Despite significant near-term headwinds, the manager maintains a bullish long-term view on St. James's Place based on structural industry tailwinds and superior business model characteristics. The company faces multiple pressures including proactive fee reductions ahead of regulatory changes, weak net flows concentrated in lower-value accounts, and currency headwinds from GBP strength. Management's decision to cap fees at 85 basis points represents a strategic move to build regulatory goodwill while impacting margins by four basis points. However, the investment thesis rests on powerful secular trends, particularly UK pension reforms that have dramatically expanded the defined contribution participant base, creating a sustained pipeline of new clients and AUM growth. The manager emphasizes the company's capital-light model that generates above-average returns on capital and strong cash conversion with most cash returned to shareholders. This represents a classic value investment where temporary operational challenges mask the underlying structural advantages and long-term growth potential of the UK's largest wealth manager.