Investment Pitches

Pitch Summary:
Marketing communication company, Interpublic Group of Companies, Inc. (IPG) traded lower in the quarter. Broad macro uncertainty and a pullback in spend from tech, telecom and smaller client accounts resulted in an earnings miss and subsequent reduction in full-year guidance. Looking ahead, management expects to grow from new business wins and strengthening performance across its media and healthcare businesses. We believe in IPG's resilient business model and its management team's ability to flex its variable cost structure to weather the cyclical headwinds that may come its way.

BSD Analysis:
Despite near-term headwinds, Ariel maintains confidence in IPG's long-term prospects based on the company's resilient business model and operational flexibility. The fund acknowledges current challenges including macro uncertainty and reduced spending from tech, telecom, and smaller clients that led to earnings disappointment and lowered guidance. However, Ariel focuses on management's expectations for growth driven by new business wins and improving performance in media and healthcare verticals. The fund emphasizes IPG's variable cost structure as a key competitive advantage, allowing management to adjust expenses during cyclical downturns while maintaining market position. This operational flexibility has historically enabled IPG to weather industry volatility and emerge stronger during recovery periods. Ariel's continued conviction suggests they view the current weakness as temporary, with IPG well-positioned to benefit from eventual advertising market recovery. The combination of new business momentum and cost structure flexibility provides downside protection while maintaining upside potential.

Pitch Summary:
In addition, alternative asset manager, KKR & Co. (KKR), traded higher following solid earnings results in a challenging market environment. This performance was supported by steady fundraising, transaction fees and the early success of two new infrastructure and private equity products. We believe KKR possesses the size and organizational structure to gain from high institutional interest in alternative assets, as well as attractive corporate valuations in certain industries and geographies. The firm also has plenty of dry powder on hand, to invest opportunistically. Notably, KKR has performed quite well across different economic and financial conditions and, in our view, should continue generating alpha for its clients over the long-term.

BSD Analysis:
Ariel presents a strong bull case for KKR based on the firm's resilient performance and strategic positioning in the growing alternative assets market. The fund emphasizes KKR's ability to deliver solid earnings despite challenging market conditions, supported by consistent fundraising and transaction fee generation. The successful launch of new infrastructure and private equity products demonstrates the firm's innovation and market responsiveness. Ariel views KKR's scale and organizational capabilities as competitive advantages in capturing institutional demand for alternative investments. The firm's substantial dry powder provides flexibility for opportunistic investing across market cycles. KKR's historical track record of performing well across various economic environments gives Ariel confidence in the firm's ability to continue generating alpha for clients. The combination of growing institutional appetite for alternatives, attractive valuations in select markets, and KKR's proven investment capabilities positions the firm for sustained long-term outperformance.

Pitch Summary:
Drilling and production equipment provider, NOV Inc. (NOV), also advanced in the period following a top and bottom-line beat. Improving demand for offshore drilling rigs is leading to higher day rates, longer contract terms and opportunities to activate idle rigs. NOV is also deploying new digital, low emissions fracking equipment and rig automation which is expected to enhance drilling efficiency. This value proposition is incentivizing oil and gas companies to increasingly utilize NOV's equipment. Meanwhile, the company has won international projects, including Saudi Aramco's plan to build new land and jackup rigs over the next 10 years. As the company continues to right-size its onshore business and grow its offshore business, with greater efficiencies, we believe the market will come to recognize NOV's value over the long term.

BSD Analysis:
Ariel maintains a bullish outlook on NOV based on improving fundamentals in the offshore drilling market and the company's technological advancement. The fund highlights NOV's strong quarterly performance with both revenue and earnings beats, indicating operational momentum. Key drivers include rising offshore drilling demand leading to higher day rates and longer contract terms, which directly benefits NOV's equipment business. The company's investment in digital, low-emission fracking technology and rig automation positions it well for the industry's shift toward efficiency and environmental compliance. The significant Saudi Aramco contract for land and jackup rigs over the next decade provides substantial long-term revenue visibility. Ariel views NOV's strategic repositioning - right-sizing onshore operations while expanding offshore capabilities - as value-creating moves that the market has yet to fully recognize. The combination of cyclical recovery in offshore drilling and NOV's technological differentiation suggests strong long-term value creation potential.

Pitch Summary:
Toy manufacturer, Mattel, Inc. (MAT). was the top contributor to returns in the period. Although the retail environment remains challenging, MAT delivered a solid earnings beat and maintained full-year guidance. The successful release of the Barbie movie is expected to generate over $125 million of gross billings this year from film royalty payments while boosting the franchises' consumer products. These results continue to highlight MAT's progress towards expanding its entertainment offering and executing on its strategy to grow market share, improve profitability and generate higher levels of cash flow. In our view, MAT remains an undervalued asset with attractive growth prospects for its Barbie and Hot Wheels brands, as well as its Disney Princess and Frozen toy lines, Trolls and the global launch of Monster High.

BSD Analysis:
Ariel presents a compelling bull case for Mattel centered on the company's successful transformation into an entertainment-driven toy manufacturer. The fund highlights MAT's solid earnings performance despite challenging retail conditions, demonstrating operational resilience. The Barbie movie's success represents a significant catalyst, generating over $125 million in gross billings from film royalties while strengthening the brand's consumer appeal. Management's strategic focus on expanding entertainment offerings and growing market share appears to be yielding results through improved profitability and cash flow generation. The fund views MAT as undervalued with multiple growth drivers across its key franchises including Barbie, Hot Wheels, Disney Princess, Frozen, Trolls, and Monster High. This diversified brand portfolio provides multiple avenues for revenue expansion and market penetration. Ariel's confidence in the long-term value creation potential suggests they see MAT as well-positioned to capitalize on the intersection of entertainment and toy manufacturing.

Pitch Summary:
Finally, we established a position in manufacturer of premium fuel and electrical systems, Phinia Inc. (PHIN), which was a spinoff from BorgWarner Inc. (BWA). Phinia is focused on the design and development of performance and emissions components of combustion and hybrid vehicles. The remaining BWA business produces components with similar capabilities, however, BWA is focused on electric vehicles. Overall, the market is excited about the longer-term organic growth of BWA at lower margins versus the higher margin Phinia business given questions of how long demand for combustion/hybrid vehicles will continue.

BSD Analysis:
Ariel established a position in Phinia following its spinoff from BorgWarner, viewing it as an attractive play on the combustion and hybrid vehicle market with superior margins. The manager highlights the market's preference for BorgWarner's electric vehicle focus over Phinia's combustion/hybrid exposure, creating a valuation opportunity. Phinia's specialization in premium fuel and electrical systems for combustion and hybrid vehicles positions it well in a market that will likely persist longer than many investors expect. The company's higher-margin business model compared to the remaining BorgWarner entity reflects its focus on performance and emissions components. While electric vehicle adoption continues, the transition timeline remains uncertain, and combustion/hybrid vehicles will likely maintain significant market share for years. Phinia's expertise in emissions and performance components becomes increasingly valuable as regulatory standards tighten. The spinoff structure often creates temporary valuation dislocations as investors sort through the investment merits of each entity, potentially providing attractive entry points for patient investors.

Pitch Summary:
We also added consumer health company, Kenvue, Inc. (KVUE), through an exchange offer from our position in Johnson & Johnson (JNJ). We view Kenvue as a beneficiary of current demographic and global economic trends, as demand for and spend on healthcare generally increases as populations age and disposable incomes rise. We expect the company's future earnings growth to be driven by continued innovation within its current product portfolio, robust cash flows and increasing global demand for healthcare, which should increase in both absolute dollars and as a percentage of GDP over the long-term.

BSD Analysis:
Ariel acquired Kenvue through the Johnson & Johnson spinoff, viewing it as well-positioned to benefit from favorable demographic and economic trends. The manager emphasizes the secular growth drivers of aging populations and rising disposable incomes, which typically increase healthcare spending both in absolute terms and as a percentage of GDP. Kenvue's portfolio of trusted consumer health brands provides defensive characteristics with pricing power and customer loyalty. The company's focus on innovation within its existing product portfolio should drive organic growth and market share gains. Strong cash flow generation capabilities provide financial flexibility for reinvestment and shareholder returns. The global nature of healthcare demand growth offers geographic diversification and expansion opportunities. Ariel views consumer health as a defensive growth sector with predictable demand patterns and limited cyclicality. The combination of secular tailwinds, strong brand portfolio, and robust cash generation makes Kenvue an attractive long-term holding.

Pitch Summary:
Also in the quarter, we initiated a position in Chevron Corporation (CVX), the second largest integrated energy company in the U.S., operating in exploration, production and refining on a global scale. We view the company as competitively advantaged with a strong balance sheet, sustainable growth pathway and an effective management team. Going forward CVX expects improved cost efficiencies and production growth via its differentiated position in the Permian Basin and recent acquisition of Noble Energy. Additionally, management believes a combination of its new higher-margin projects along with operational improvements will drive a double-digit return of capital employed by 2027. Although oil and gas prices, which lay outside of the company's control, ultimately dictate Chevron's earnings and cashflow profile, the organization is laser focused on capital discipline. It is this lack of predictability, and potential fear of a global recession which presented us with an opportunity to initiate a position in this high barrier to entry producer at reasonable prices.

BSD Analysis:
Ariel initiated a new position in Chevron, viewing it as a competitively advantaged integrated energy company with strong fundamentals and attractive valuation. The manager emphasizes Chevron's differentiated position in the high-return Permian Basin and strategic Noble Energy acquisition, which should drive production growth and cost efficiencies. Management's target of double-digit return on capital employed by 2027 reflects confidence in higher-margin projects and operational improvements. Chevron's strong balance sheet and disciplined capital allocation approach provide financial flexibility during commodity price volatility. The company operates in a high barrier-to-entry industry with significant competitive moats through scale, integrated operations, and premium asset base. Ariel views current market concerns about recession and commodity price volatility as creating an attractive entry point for a quality operator. The combination of sustainable growth prospects, strong cash generation potential, and reasonable valuation makes Chevron an attractive long-term investment despite commodity price uncertainty.

Pitch Summary:
Finally, leading global manufacturer of power generation equipment, Generac Holdings, Inc. (GNRC), underperformed in the quarter. Management lowered full-year guidance as a soft consumer environment resulted in weaker-than-expected residential sales, margin contraction and an earnings miss. Subsequently, GNRC held an investor day and issued a new 3-year outlook above consensus driven by grid instability, climate change and accelerating power outages. In our view, GNRC's home standby generator business as well as its commercial and industrial opportunities will benefit from such heightened consumer sensitivities and result in a long runway of penetration across an expanding addressable market, margin expansion and free cash flow generation.

BSD Analysis:
Despite near-term softness, Ariel maintains a bullish long-term outlook for Generac based on secular growth drivers and market expansion opportunities. The company faced headwinds from a challenging consumer environment, leading to weaker residential sales and margin contraction. However, management's updated 3-year outlook above consensus reflects confidence in structural demand drivers including grid instability, climate change, and increasing power outages. These macro trends are creating heightened consumer awareness of backup power needs, expanding Generac's addressable market significantly. The company's leadership position in home standby generators provides a strong foundation for market share gains as penetration rates remain low. Commercial and industrial opportunities offer additional growth vectors with higher margins and recurring service revenue. Generac's ability to capitalize on these secular trends should drive sustained revenue growth, margin expansion, and robust free cash flow generation over the long term.

Pitch Summary:
Manufacturer and distributor of floorcovering products, Mohawk Industries Inc. (MHK), detracted from our returns in the period. MHK has historically demonstrated its ability to deliver sales growth and generate strong cash flow despite significant inflation, rising interest rates, and geopolitical instability. However, over the past few quarters, consumer demand has been muted due to a challenging macro environment. Additionally, near-term margin headwinds continue to pressure results, but as channel inventories near the bottom, management is optimistic that volumes will increase as the housing market improves over time. In our view, MHK's healthy balance sheet and success managing through economic cycles have the company well positioned to benefit from long-term growth in residential remodeling, new home construction and commercial projects. At current levels, MHK is trading at a -64% discount to our estimate of private market value.

BSD Analysis:
Ariel maintains a bullish long-term view on Mohawk Industries despite cyclical headwinds, emphasizing the company's proven resilience and attractive valuation. The manager acknowledges near-term challenges from muted consumer demand and margin pressure but highlights Mohawk's historical ability to navigate difficult operating environments. The company's track record of delivering sales growth and strong cash flow generation through inflation, rising rates, and geopolitical instability demonstrates operational excellence. Management's optimism about volume recovery as channel inventories reach bottom levels suggests improving fundamentals ahead. Mohawk's healthy balance sheet provides financial flexibility to weather the current downturn and invest for future growth. The company is well-positioned to benefit from long-term secular trends in residential remodeling, new home construction, and commercial development. At a 64% discount to private market value, MHK offers compelling risk-adjusted returns for patient investors willing to look through the cycle.

Pitch Summary:
There were a few notable performance detractors in the quarter. Leading direct-to-consumer pool and spa care services company in the U.S., Leslie's Inc. (LESL), declined in the period following a preannounced earnings miss. Unfavorable weather across key markets and increased price sensitivity has resulted in weaker than expected store and website traffic trends. Investor concerns regarding the potential deflation on the price of chlorine further weighed on shares. In response to these results, management is reducing inventory, cutting costs and installed a new CFO. We believe our thesis remains intact. In our view, the company continues to differentiate itself through its loyal client base, vertically integrated supply chain, scale advantage and seamless customer experience.

BSD Analysis:
Despite near-term headwinds, Ariel maintains conviction in Leslie's long-term investment thesis based on competitive advantages and market position. The company faced temporary challenges from unfavorable weather patterns and increased consumer price sensitivity, leading to weaker traffic trends and an earnings miss. Management's proactive response through inventory reduction, cost cutting, and CFO replacement demonstrates operational discipline during challenging periods. Ariel emphasizes Leslie's structural competitive advantages, including a loyal customer base that provides recurring revenue visibility and pricing power. The company's vertically integrated supply chain offers cost advantages and supply security, while its scale provides negotiating leverage with suppliers. Leslie's seamless omnichannel customer experience differentiates it from competitors and drives customer retention. The manager views current weakness as cyclical rather than structural, maintaining confidence in the company's market-leading position in the fragmented pool care industry.

Pitch Summary:
Additionally, global investment bank, Goldman Sachs Group, Inc. (GS), increased in the period. Although the company posted mixed earnings results and lowered full-year guidance, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and an enhanced focus on driving profitability in Platform Solutions. GS also noted signs of a recovery in a few investment banking areas, including equity capital markets and mergers & acquisitions. With the stock currently trading near book value, management also announced intentions to return more capital to shareholders via buybacks. Looking ahead, we view the near and long-term outlook for Goldman as attractive at current levels, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.

BSD Analysis:
Ariel presents a constructive view on Goldman Sachs despite near-term earnings headwinds, focusing on strategic transformation and attractive valuation. The manager acknowledges mixed earnings and lowered guidance but emphasizes successful execution of strategic initiatives to improve returns. Goldman's rightsizing efforts and strategic pivot away from consumer banking toward higher-margin Platform Solutions demonstrate disciplined capital allocation. Early signs of recovery in core investment banking areas, particularly equity capital markets and M&A, suggest cyclical improvement ahead. Trading near book value provides significant downside protection while management's commitment to increased share buybacks enhances shareholder returns. The combination of strategic repositioning, expense management, and favorable business trends positions Goldman for improved profitability. Ariel's bullish outlook reflects confidence in management's ability to navigate the current environment while positioning for long-term growth. The attractive valuation provides compelling risk-adjusted returns for patient investors.

Pitch Summary:
Global leader in money transfer services Western Union Company (WU), also advanced following a top- and bottom-line earnings beat and subsequent raise in full-year guidance. These results were aided by regulatory change in Iraq and margin expansion in the retail business. Meanwhile, management continues to return capital to shareholders through dividends and share repurchases. Although the company anticipates the macroeconomic environment will continue to slow, it reminded investors remittances have proved resilient in prior periods of economic contraction. At current levels, WU is trading at a discount to our estimate of private market value.

BSD Analysis:
Ariel maintains a bullish stance on Western Union based on strong fundamental performance and defensive business characteristics. The company delivered both top-line and bottom-line earnings beats, prompting management to raise full-year guidance, demonstrating operational excellence. Regulatory changes in Iraq and retail margin expansion highlight WU's ability to capitalize on market opportunities and improve profitability. The company's consistent capital return program through dividends and buybacks reflects strong cash generation and shareholder-friendly management. Western Union's remittance business model has historically proven resilient during economic downturns, providing defensive characteristics in uncertain macroeconomic environments. The manager emphasizes that remittances tend to be counter-cyclical, as economic stress often increases the need for cross-border money transfers. Trading at a discount to private market value, WU offers attractive risk-adjusted returns with downside protection.

Pitch Summary:
Oil and natural gas explorer, APA Corporation (APA), traded higher over the quarter. APA continues to deliver strong earnings results highlighted by solid production volumes as well as tighter expense controls. The output in the Permian Basin remains solid. APA also has overcome its operational challenges in Egypt and expects to hit its 2H23 oil production guidance in the region. Management also expressed confidence in the Suriname development and is working with TotalEnergies to put together a plan for the oil hub. Looking ahead, APA remains focused on higher-margin oil developments, driving safety and operational improvements, and prioritizing a reduction in carbon intensity. Meanwhile, capital returns through Q2 exceeded APA's minimum 60% return of free cash flow to shareholders through dividends and repurchases, with the potential for more buybacks in the second half of the year. At current valuation levels, APA is trading at a 30% discount to our private market value estimate.

BSD Analysis:
Ariel presents a compelling bull case for APA Corporation based on strong operational execution and attractive valuation. The manager highlights APA's consistent earnings delivery driven by solid Permian Basin production and improved cost controls. The company has successfully resolved operational challenges in Egypt and is positioned to meet production guidance, while the Suriname development with TotalEnergies represents significant future upside potential. APA's capital allocation strategy is particularly attractive, with management returning over 60% of free cash flow to shareholders through dividends and buybacks, exceeding their minimum commitment. The company's strategic focus on higher-margin oil developments and carbon intensity reduction aligns with long-term energy transition trends. At a 30% discount to private market value, APA offers compelling risk-adjusted returns. The combination of strong cash generation, disciplined capital allocation, and strategic positioning in premium basins supports the bullish thesis.

Pitch Summary:
Also in the quarter, we added marketer and distributor of over-the-counter pharmaceutical drugs and products, Prestige Consumer Healthcare Inc. (PBH). The company has a history of innovation and acquiring products to meet unmet consumer needs. Following an acquisition in 2017, the company levered the balance sheet and has been focused on using free cash flow to pay down debt. As its products, such as cough/cold and travel, rebound from COVID-19 pressures, we expect margins and earnings growth to lead to multiple expansion.

BSD Analysis:
Ariel initiated a new position in Prestige Consumer Healthcare, viewing it as an attractive recovery play in the OTC pharmaceutical space. The investment thesis centers on the company's proven track record of innovation and strategic acquisitions to address unmet consumer healthcare needs. Following a 2017 acquisition that increased leverage, management has demonstrated disciplined capital allocation by prioritizing debt reduction through free cash flow generation. Ariel sees significant upside as COVID-19 headwinds subside, particularly for cough/cold and travel-related products that were disproportionately impacted. The manager expects this recovery to drive margin expansion and earnings growth, leading to multiple re-rating. The bull case appears based on operational leverage, balance sheet improvement, and normalized demand patterns returning to pre-pandemic levels across the product portfolio.

Pitch Summary:
Finally, leading global manufacturer of power generation equipment, Generac Holdings, Inc. (GNRC), underperformed in the quarter. Management lowered full-year guidance as a soft consumer environment resulted in weaker-than-expected residential sales, margin contraction and an earnings miss. Subsequently, GNRC held an investor day and issued a new 3-year outlook above consensus driven by grid instability, climate change and accelerating power outages. In our view, GNRC's home standby generator business as well as its commercial and industrial opportunities will benefit from such heightened consumer sensitivities and result in a long runway of penetration across an expanding addressable market, margin expansion and free cash flow generation.

BSD Analysis:
Despite near-term challenges, Ariel remains bullish on Generac's long-term prospects driven by secular trends in power reliability. The company faced headwinds from weak consumer spending, resulting in guidance cuts and margin pressure in residential markets. However, management's investor day outlined a compelling 3-year outlook above consensus expectations. Ariel's investment thesis centers on structural drivers including grid instability, climate change impacts, and increasing power outages creating sustained demand for backup power solutions. The manager sees significant runway for market penetration expansion across both residential and commercial segments. Key value drivers include an expanding addressable market, margin recovery potential, and strong free cash flow generation capabilities as adoption accelerates driven by heightened consumer awareness of power reliability needs.

Pitch Summary:
Marketing communication company, Interpublic Group of Companies, Inc. (IPG), also traded lower in the quarter. Broad macro uncertainty and a pullback in spend from tech, telecom and smaller client accounts resulted in an earnings miss and subsequent reduction in full-year guidance. Looking ahead, management expects to grow from new business wins and strengthening performance across its media and healthcare businesses. We believe in IPG's resilient business model and its management team's ability to flex its variable cost structure to weather the cyclical headwinds that may come its way.

BSD Analysis:
Ariel maintains a constructive view on Interpublic Group despite recent earnings disappointments and guidance reductions. The manager attributes the underperformance to broad macroeconomic uncertainty and client spending pullbacks in tech, telecom, and smaller accounts rather than company-specific issues. The investment thesis emphasizes IPG's business model resilience and management's operational flexibility through variable cost structures. Ariel highlights potential growth catalysts including new business wins and strengthening performance in media and healthcare verticals. The manager appears confident in management's ability to navigate cyclical advertising spending patterns. The bull case rests on IPG's diversified client base, global scale advantages, and proven ability to adjust costs during downturns while positioning for recovery when advertising markets improve.

Pitch Summary:
Leading direct-to-consumer pool and spa care services company in the U.S., Leslie's Inc. (LESL), declined in the period following a preannounced earnings miss. Unfavorable weather across key markets and increased price sensitivity has resulted in weaker than expected store and website traffic trends. Investor concerns regarding the potential deflation on the price of chlorine further weighed on shares. In response to these results, management is reducing inventory, cutting costs and installed a new CFO. We believe our thesis remains intact. In our view, the company continues to differentiate itself through its loyal client base, vertically integrated supply chain, scale advantage and seamless customer experience.

BSD Analysis:
Despite recent underperformance, Ariel maintains conviction in Leslie's long-term investment thesis. The manager acknowledges near-term headwinds including unfavorable weather patterns and consumer price sensitivity that impacted traffic and earnings. Chlorine price deflation concerns have created additional investor skepticism. However, Ariel views these as temporary cyclical challenges rather than structural issues. The investment case remains anchored on Leslie's competitive advantages including customer loyalty, vertical integration, and scale benefits in the fragmented pool care market. Management's proactive response through inventory reduction, cost cutting, and CFO replacement demonstrates operational discipline. Ariel appears confident that the company's market leadership position and differentiated customer experience will drive recovery once weather patterns normalize and consumer spending stabilizes.

Pitch Summary:
Toy manufacturer, Mattel, Inc. (MAT) also increased in the period. Although the retail environment remains challenging, MAT delivered a solid earnings beat and maintained full-year guidance. The successful release of the Barbie movie is expected to generate over $125 million of gross billings this year from film royalty payments while boosting the franchises' consumer products. These results continue to highlight MAT's progress towards expanding its entertainment offering and executing on its strategy to grow market share, improve profitability and generate higher levels of cash flow. In our view, MAT remains an undervalued asset with attractive growth prospects for its Barbie and Hot Wheels brands, as well as its Disney Princess and Frozen toy lines, Trolls and the global launch of Monster High.

BSD Analysis:
Ariel presents a positive outlook for Mattel, emphasizing the company's successful execution of its entertainment strategy transformation. The Barbie movie success serves as a key catalyst, generating significant royalty revenue while driving consumer product sales across the franchise. The manager views this as validation of Mattel's strategy to expand beyond traditional toy manufacturing into entertainment content. Despite challenging retail conditions, the company's earnings beat and maintained guidance demonstrate operational resilience. Ariel sees multiple growth drivers across the portfolio including established brands like Hot Wheels and licensed properties like Disney Princess and Frozen. The investment thesis centers on Mattel's undervaluation relative to its brand portfolio strength and entertainment expansion potential, with improving profitability and cash flow generation as key value drivers.

Pitch Summary:
Shares of global leader in for-profit education, Adtalem Global Education (ATGE), also advanced on a top- and bottom-line earnings beat and subsequent increase at the low-end of its FY2024 Adjusted EPS guidance. We remain encouraged by the continued recovery in nursing school programs, highlighted by Walden's new student enrollment up double-digits versus last year. Although, enrollment trends across the medical schools faced headwinds in the quarter, they appear temporary, with management having already implemented the necessary changes to convert strong underlying demand into students. Although investors remain skeptical of the near-term backdrop, we believe ATGE will benefit from the healthcare worker shortage in the U.S., evidenced by its market leadership as the number one grantor of nursing degrees in the U.S. and the largest producer of African-American MDs, PhDs and nurses in the country.

BSD Analysis:
Ariel maintains a bullish stance on Adtalem Global Education, driven by strong fundamental performance and secular healthcare trends. The company delivered earnings beats and raised guidance, demonstrating operational execution. The manager highlights robust nursing program recovery with double-digit enrollment growth at Walden University as a key positive indicator. While medical school enrollment faced temporary headwinds, management has implemented corrective measures to capture underlying demand. Ariel's investment thesis is anchored on the structural U.S. healthcare worker shortage, positioning ATGE as a beneficiary through its market-leading position in nursing education. The company's role as the top grantor of nursing degrees and largest producer of African-American healthcare professionals provides competitive advantages and addresses critical workforce diversity needs.

Pitch Summary:
Live entertainment, media and technology company, Sphere Entertainment Co. (SPHR) was the top contributor during the quarter. Shares jumped following news the Las Vegas venue was on track to open in late September and costs were in-line with expectations. Additionally, the company delivered a profitable fourth quarter relative to the loss posted a year ago. While the Sphere venue will take some time to reach its full potential, the company is planning to have events 365 days a year. In addition to hosting concert residencies, marquee sporting and corporate events, The Sphere Experience will debut in October, consisting of a series of exhibits chronicling technology's impact on the development of human potential. Management also believes there is a significant opportunity for advertising and sponsorship on the Exosphere (the Sphere's exterior) as well as licensing interior VIP hospitality suites. Meanwhile, U2 opened to great fanfare on September 29th – sending shares even higher into the month of October. In our view, the Sphere's new experiential immersive venue and the company's two regional sports and entertainment networks present a long-term opportunity, which remains meaningfully underappreciated at current trading levels.

BSD Analysis:
Ariel presents a compelling bull case for Sphere Entertainment, highlighting the successful opening of their Las Vegas venue as a key catalyst. The manager emphasizes the venue's profitability turnaround and year-round event programming potential as fundamental drivers. The investment thesis centers on multiple revenue streams including concert residencies, corporate events, advertising on the exterior Exosphere, and VIP hospitality licensing. The successful U2 opening demonstrates market validation of the immersive entertainment concept. Ariel views the stock as meaningfully undervalued relative to its long-term potential, particularly given the company's regional sports networks providing additional value. The manager appears confident in the venue's ability to reach full utilization and generate sustainable cash flows from its differentiated entertainment offering.