Investment Pitches

Pitch Summary:
LLY discovers, develops, manufactures, and markets pharmaceuticals. The company manufactures and distributes products through facilities in the United States and seven other countries and sells into 110 countries. The company has a broad and deep portfolio of products including a focus on diabetes, oncology, immunology, and neuroscience. More recently, LLY's obesity drug Mounjaro, has delivered revenue growth acceleration, and investors are optimistic that the company's Alzheimer drug, currently in trials, will add to that growth in the future. LLY has a stable portfolio of franchise products that enables it to invest heavily in its product pipeline. We believe that this combination of franchise and growth products will drive high teens revenue growth and a four-fold increase in free cash flow in the next five years. We initiated a small position in August.

BSD Analysis:
RiverPark initiated a position in Eli Lilly, attracted by the company's diversified pharmaceutical portfolio and promising pipeline catalysts. The manager emphasizes LLY's global reach across 110 countries and therapeutic focus areas including diabetes, oncology, immunology, and neuroscience. The investment thesis is anchored on two key growth drivers: the obesity drug Mounjaro, which is already accelerating revenue growth, and a potential Alzheimer's treatment currently in trials. The fund projects aggressive financial targets, expecting high-teens revenue growth and a four-fold increase in free cash flow over five years. This suggests significant operating leverage and margin expansion potential as new products scale. The manager views LLY's stable franchise products as providing a reliable cash flow base to fund continued R&D investment, creating a virtuous cycle of innovation and growth. The combination of established franchises and breakthrough therapies positions LLY for sustained outperformance in the pharmaceutical sector.

Pitch Summary:
EQIX, a position we have held before, is a REIT that provides a global web of network-neutral, multi-tenant data centers that allow enterprises to bring together and interconnect the infrastructure required to compete in the digital economy. The company operates 248 data centers in 32 countries and 72 markets. These datacenters sit on top of the cable infrastructure and house the internet service provider equipment that connects and powers the internet. The company charges tenants rent for colocation space, plus metered power and interconnects utilized. EQIX's revenue growth is driven by price increases, greater cross-connect utilization, and new data center development. We believe the company can compound revenue at more than 10% a year over the next five years, and more than double Funds From Operations (FFO). We re-initiated a small position in August.

BSD Analysis:
RiverPark re-initiated a position in Equinix, viewing it as a compelling play on digital infrastructure growth. The manager highlights EQIX's global footprint of 248 data centers across 32 countries as a competitive moat in the network-neutral colocation space. The investment thesis centers on sustained revenue growth drivers including pricing power, increased cross-connect utilization, and new facility development. The fund expects EQIX to achieve over 10% annual revenue growth and more than double its FFO over five years, suggesting strong cash flow generation potential. The REIT structure provides attractive income characteristics while benefiting from secular trends toward cloud adoption and digital transformation. The manager's familiarity with the name, having held it previously, indicates confidence in the business model and management execution. This appears to be a high-conviction infrastructure play positioned for long-term secular growth.

Pitch Summary:
Darling Ingredients Inc. (DAR), the largest publicly traded company turning edible by-products and food waste into sustainable products and a leading producer of renewable energy, was one of the top detractors in the SMID Cap strategy in the third quarter. The stock has been under increased pressure in recent weeks, as fears regarding new industry supply of renewable diesel and the lack of government support have increased. We have been owners of Darling for over 17 years, and the story has always been a bit complicated for short-term traders. Over time and through thoughtful leadership and capital allocation, the company has built a vertically integrated growth engine with attractive returns on capital while consolidating the industry and driving innovation. We expect EBITDA to grow year over year >50% in 2023 and continue to expand over the next 2-3 years as recent M&A and growth capex drive deleveraging and free cash flow. The company is currently constructing Sustainable Aviation Fuel (SAF) capacity expected to come online in 4Q24 and is evaluating further SAF expansion for the future, as growth and incentives in that market provide significant margin expansion and return on investment. With EBITDA approaching $2 billion next year and the enterprise value of the business at quarter end of ~$12.8 billion, the stock is trading at its lowest EV/EBITDA multiple since 2012. Other valuation methodologies suggest a similarly low multiple relative to history. We look for continued execution and strong fundamentals to trump headline noise over the coming years and produce a sufficient return for shareholders.

BSD Analysis:
SouthernSun maintains strong conviction in Darling Ingredients despite recent stock pressure from renewable diesel supply concerns and government policy uncertainty. As a 17-year holding, the manager emphasizes the company's successful transformation into a vertically integrated sustainable products leader through disciplined capital allocation and industry consolidation. With EBITDA expected to grow over 50% in 2023 and continue expanding through 2025-2026, driven by recent M&A and growth investments, the fundamental outlook remains robust. The upcoming Sustainable Aviation Fuel capacity launch in Q4 2024 represents a significant margin expansion opportunity. Trading at the lowest EV/EBITDA multiple since 2012 despite approaching $2 billion in EBITDA, the valuation appears compelling for long-term investors willing to look past near-term headline noise.

Pitch Summary:
Dycom Industries, Inc. (DY), a leading provider of engineering and construction services to the telecommunications and utility industries, was the top detractor in the SMID Cap strategy, despite delivering solid revenue (+7%) and adjusted EBITDA growth (+25%). Management expects flat revenue growth next quarter due to a moderation in spending from two large customers (AT&T and Frontier), but a very strong demand environment in 2024 - driven partly by unprecedented government funding through the ARPA, RDOF, and BEAD programs. Profitability continues to improve from the depressed levels of the last few years, and we continue to believe there is further room for margin expansion. Our meetings and construction site visits with management this quarter in Nashville, TN gave us a renewed appreciation for the difficulty of managing construction projects and a deeper conviction that Steve Nielsen, CEO has a deep understanding of the industry and a decision-making framework driven by shareholder returns. With only 43% of the homes in the U.S. passed with fiber, we continue to believe there is a long runway for fiber penetration, and Dycom is well-positioned to engineer and construct these fiber networks.

BSD Analysis:
Despite near-term stock weakness, SouthernSun remains bullish on Dycom's long-term prospects in the telecommunications infrastructure buildout. The company delivered strong operational performance with 7% revenue growth and 25% EBITDA expansion, though temporary customer spending moderation from AT&T and Frontier is expected to impact near-term growth. The manager emphasizes the massive opportunity ahead, with unprecedented government funding through ARPA, RDOF, and BEAD programs driving 2024 demand and only 43% of U.S. homes currently passed by fiber. CEO Steve Nielsen's industry expertise and shareholder-focused decision-making provide confidence in execution. With continued margin expansion potential and a multi-year fiber penetration runway, Dycom appears well-positioned for sustained growth.

Pitch Summary:
Murphy USA, Inc. (MUSA), a leading retailer of gasoline and convenience merchandise, was one of the top contributors in the SMID Cap strategy in the third quarter. In our view, MUSA reported solid results for the second quarter of 2023, as it continues to benefit from its position as a low-cost, high-volume retailer of fuel. Fuel margins in the c-store industry have shifted higher in recent years due to cost and volume pressures faced by marginal, independent retailers, who as a group, comprise a large percentage of domestic fuel marketers. Due to its advantaged locations on Walmart outparcels, the small footprint for most of their stores, and low labor business model, MUSA disproportionately benefits from these higher fuel margins. We visited with management at their company headquarters recently and reviewed the business's competitive position and its capital allocation outlook. Driven by its value proposition to consumers, MUSA continues to grow on a same-store basis and management sees a continued opportunity for new store additions and "raze and rebuild" of older stores. Management also continues to repurchase shares with excess cash flow, somewhat against the grain of an industry that has seen significant consolidation in recent years. In what we believe is evidence of capital discipline and owner orientation, since its spin in 2013, MUSA management has bought back over 50% of its shares outstanding while completing just one bolt-on acquisition.

BSD Analysis:
SouthernSun views Murphy USA as a compelling investment benefiting from structural industry dynamics and superior positioning. The company's low-cost operating model, advantaged Walmart outparcel locations, and small store footprint enable it to capture disproportionate benefits from industry-wide fuel margin expansion driven by independent retailer consolidation. Management's disciplined approach to capital allocation is evident in their aggressive share repurchase program, having bought back over 50% of shares since the 2013 spinoff while maintaining growth through selective new store development and store rebuilds. The combination of same-store sales growth, expansion opportunities, and shareholder-friendly capital allocation in a consolidating industry creates an attractive long-term value proposition.

Pitch Summary:
Boston Beer Company, Inc. (SAM) reported results that were better than market expectations and was the top contributor in the SMID Cap strategy in the third quarter. The company continues to fight headwinds in the hard seltzer category with its Truly brand. However, the Twisted Tea brand is now significantly larger than Truly and continues to produce excellent results. Management is steering a multi-year effort to enhance the efficiency of its manufacturing processes that we believe is likely to produce margin improvement. The company continues to launch new innovations; we believe these innovations will produce results in the long term, though the timing of the benefits is difficult to predict. Management continues to govern the balance sheet prudently, with no debt, and they recently began repurchasing shares with excess cash flow for the first time in several years. We remain confident their efforts to grow the brands, improve the efficiency of operations, and allocate the company's capital effectively will reward investors over time.

BSD Analysis:
SouthernSun maintains a bullish stance on Boston Beer despite headwinds in the hard seltzer category affecting the Truly brand. The manager highlights that Twisted Tea has become the company's largest brand and continues delivering strong performance, offsetting seltzer weakness. Management's multi-year manufacturing efficiency initiative is expected to drive margin expansion over time. The company's debt-free balance sheet provides financial flexibility, and the recent resumption of share repurchases after several years demonstrates disciplined capital allocation. While innovation timing remains uncertain, SouthernSun believes the combination of brand growth, operational improvements, and effective capital deployment will generate attractive long-term returns for shareholders.

Pitch Summary:
Away from power, drug maker Teva, a new holding, also performed well during the quarter. Teva develops, manufactures and markets generic and specialty drugs focused on neurological and respiratory diseases, as well as oncology. Following a period of poor capital allocation decisions in prior years, we were able to invest at a very attractive valuation. We now believe management has positioned the company for renewed growth, driven by its most promising branded drug pipeline in years. The investment is off to a good start and the stock gained after second quarter results topped consensus.

BSD Analysis:
Sound Shore initiated a new position in Teva Pharmaceutical at an attractive valuation following a period of poor capital allocation that created the investment opportunity. The company operates in generic and specialty pharmaceuticals with focus areas in neurological and respiratory diseases, as well as oncology. The investment thesis is predicated on a management turnaround story, with current leadership having repositioned the company for renewed growth after previous missteps. A key catalyst is Teva's most promising branded drug pipeline in years, which should drive future revenue and margin expansion beyond the generic drug base. Early results support the thesis, with second quarter earnings beating consensus expectations and driving stock appreciation. The managers view this as a classic contrarian value opportunity where operational improvements and pipeline development can drive significant returns from a depressed valuation base.

Pitch Summary:
Meanwhile, Midwest focused Constellation is the biggest producer of carbon-free electricity in the US with nuclear power plants representing the majority of its capacity. We added the name in January 2023 when the stock was trading at a below normal 15 times earnings. Our research identified an upside to earnings power from maturing hedges and regulatory changes, including the Inflation Reduction Act's nuclear credit. A recent spinout from Exelon Corp, we viewed the strength of Constellation's clean, reliable baseload power model as an appealing and high potential offering for residential and commercial customers. The company's recent contract to supply Microsoft at premium power prices is evidence of the opportunity. Constellation is yet another example of an industry undergoing tremendous change that can offer attractive investment opportunities for investors with patience and a research process to uncover specific companies that are well positioned.

BSD Analysis:
Sound Shore initiated a position in Constellation Energy in January 2023 at an attractive 15x earnings multiple, recognizing the company's unique position as America's largest carbon-free electricity producer. The investment thesis centers on multiple earnings catalysts including maturing hedges that should unlock higher realized prices and regulatory tailwinds from the Inflation Reduction Act's nuclear credits. As an Exelon spinout, Constellation benefits from a clean, reliable baseload power model dominated by nuclear generation, which provides competitive advantages in serving residential and commercial customers. The recent premium-priced contract with Microsoft validates the value proposition of clean, reliable power in the current market environment. The managers view Constellation as well-positioned to capitalize on the ongoing energy transition and increasing demand for carbon-free electricity. The combination of regulatory support, maturing hedges, and premium pricing opportunities for clean power creates multiple avenues for earnings growth.

Pitch Summary:
On the plus side of the ledger, we had strong contributions from independent power producers Vistra and Constellation Energy. Both stocks surged with higher US electricity prices as strong summer demand exposed reliability issues in many regions of the nation's electric grid. Vistra, primarily a Texas electricity generator and marketer, is a name we've discussed in prior letters. The company is a low cost supplier with diversified fuel sources, and it will soon be closing its accretive acquisition of another merchant power generator, Energy Harbor. Even after its strong performance, the stock retains a 15% free cash flow yield.

BSD Analysis:
Sound Shore highlights Vistra as a strong performer benefiting from structural changes in the electricity market, particularly in Texas where the company operates as a low-cost generator and marketer. The investment thesis is supported by the company's diversified fuel portfolio and competitive cost position, which provides operational flexibility and margin protection. A key catalyst is the pending accretive acquisition of Energy Harbor, another merchant power generator, which should enhance scale and market position. Despite strong recent performance driven by higher electricity prices and grid reliability concerns, the stock continues to offer attractive valuation with a 15% free cash flow yield. The managers view Vistra as well-positioned to capitalize on ongoing electricity market dynamics and infrastructure challenges. Summer demand patterns and grid reliability issues have created favorable pricing conditions that benefit independent power producers like Vistra.

Pitch Summary:
For example, GE Healthcare (GEHC) was our largest detractor for the period. A recent spinout from GE, the company is the world's largest medical imaging supplier with steady growth and higher margins. We purchased the stock in the first quarter of 2023 when it was trading at 14 times normalized earnings, a significant discount to peers. Our research concluded that GEHC's profit margins were temporarily depressed due to the spinoff and one-time Research & Development charges, and that management's plan for improvement was credible. The stock got off to a strong start early in the year, but returned the bulk of its gains as higher borrowing rates for their customers created demand uncertainty. As well, 15% of GE Healthcare's business is from China, where demand has slowed along with the economy. We view these headwinds as temporary, and added to our position during the stock's recent pullback.

BSD Analysis:
Sound Shore maintains a bullish stance on GE Healthcare despite recent underperformance, viewing the company as an attractively valued market leader in medical imaging. The managers purchased shares at 14x normalized earnings, representing a significant discount to peers, based on their assessment that current margin compression is temporary due to spinoff-related costs and one-time R&D charges. The investment thesis centers on GEHC's dominant market position as the world's largest medical imaging supplier with steady growth characteristics and structurally higher margins. Near-term headwinds include elevated borrowing costs affecting customer demand and China exposure (15% of business) amid economic slowdown. However, management's credible improvement plan and the temporary nature of current pressures support the contrarian position. The fund's decision to add shares during the recent pullback demonstrates conviction in the long-term value proposition.

Pitch Summary:
Among our buys during the third quarter, we added Shake Shack, Inc. (SHAK), a company we've owned in the past. Shake Shack is a U.S. and international operator of fast-casual restaurants focused on a range of American classics like burgers, crinkle-cut fries, shakes, beer and wine. We're impressed with its business model and well-established brand, which continue to inspire a loyal following. The company and the stock stumbled during the Covid-19 pandemic and were slow to recover. However, we think management has finally righted the ship. And Shake Shack now seems poised to resume its growth trajectory.

BSD Analysis:
Wasatch's decision to repurchase Shake Shack reflects confidence in the company's post-pandemic recovery and management's operational turnaround efforts. The fast-casual restaurant chain's well-established brand and loyal customer following provide a strong foundation for renewed growth after COVID-related challenges. Shake Shack's focus on American classics like premium burgers, crinkle-cut fries, and shakes has created differentiated positioning in the competitive fast-casual segment. The company's business model combines strong unit economics with both domestic and international expansion opportunities. Management appears to have successfully navigated the pandemic-related operational challenges that previously hindered performance and recovery. Wasatch believes the company is now positioned to resume its historical growth trajectory, supported by brand strength and improved operational execution. The timing of this repurchase suggests Wasatch views current valuation levels as attractive relative to the company's long-term growth potential in the fast-casual dining market.

Pitch Summary:
Another weak stock in the strategy was Five Below, Inc. (FIVE). This discount retailer has set itself apart with its branding and unique approach of, as its name suggests, pricing most items at five dollars or less. Second-quarter revenues and earnings met expectations, and management projected that third- and fourth-quarter revenues would be in line with forecasts and better than industry peer comparisons. But the stock was down because upcoming quarterly margins and earnings are projected to decline due to theft and expenses associated with theft prevention. While this news was disappointing, we think management has responded appropriately. We still expect the company's new-store growth rate to accelerate from the low teens to the high teens over the next 12 months. Five Below plans to add approximately 250 new locations, which we think will position the company to take advantage of both the 2023 and 2024 holiday shopping seasons.

BSD Analysis:
Despite near-term margin pressure from theft-related issues, Wasatch maintains confidence in Five Below's long-term growth trajectory and unique market positioning. The company's distinctive $5-and-under pricing strategy has created strong brand recognition and customer loyalty among teen and pre-teen demographics. While theft and associated prevention costs are pressuring margins in the near term, management's proactive response demonstrates operational competence in addressing these challenges. The key investment thesis centers on aggressive store expansion, with new-store growth accelerating from low teens to high teens over the next 12 months. Five Below's plan to add approximately 250 new locations represents significant market expansion and positions the company to capitalize on both 2023 and 2024 holiday shopping seasons. Revenue performance continues meeting expectations and outpacing industry peers, indicating underlying business strength despite margin headwinds. Wasatch views the current weakness as temporary operational challenges that don't undermine the company's fundamental growth strategy or market opportunity in discount retail.

Pitch Summary:
Silk Road Medical, Inc. (SILK) was also a significant detractor. The company provides medical devices used in its minimally invasive procedure (called Transcarotid Artery Revascularization, or TCAR) for the treatment of blockages in the carotid artery. Silk Road's stock price fell sharply in July after the Centers for Medicare & Medicaid Services (CMS) issued a proposed coverage decision placing traditional carotid stenting at the same reimbursement level as TCAR. The concern is that CMS support for the competitive method could hurt Silk Road's revenues. We think investors have overreacted. Although CMS has leveled the playing field on reimbursement, we believe outcomes—not reimbursements—will be a more important competitive factor. Silk Road's innovative system to reverse blood flow during TCAR directs any stroke-causing material away from the brain and into a filter, resulting in better outcomes than traditional stenting. Over time, we expect TCAR to continue to take market share and become the new standard of care for treating carotid artery disease.

BSD Analysis:
Wasatch views the sharp decline in Silk Road Medical as an overreaction to CMS reimbursement changes, creating an attractive entry opportunity in a superior medical technology. While the proposed coverage decision levels reimbursement between TCAR and traditional carotid stenting, Wasatch believes clinical outcomes will ultimately drive adoption rather than reimbursement parity. Silk Road's innovative blood flow reversal system represents a meaningful technological advancement, directing stroke-causing debris away from the brain during procedures and delivering demonstrably better patient outcomes. This clinical superiority should drive continued market share gains as physicians prioritize patient safety and procedural success over reimbursement considerations. The company's TCAR procedure is positioned to become the new standard of care for carotid artery disease treatment based on its superior safety profile. Wasatch expects the initial reimbursement concerns to fade as clinical evidence continues supporting TCAR's advantages, with the technology gaining broader adoption among vascular surgeons. The current valuation disconnect presents an opportunity to own a best-in-class medical device company at a discount.

Pitch Summary:
The third quarter's greatest detractor from strategy performance was Inspire Medical Systems, Inc. (INSP). The company develops minimally invasive solutions for patients with obstructive sleep apnea. Inspire and other medical-technology firms saw their stock prices decline on concerns that the growing use of GLP-1 weight-loss drugs would reduce the need for treatments of obesity-related illnesses such as diabetes and sleep apnea. However, Inspire's nerve-stimulating device can't be prescribed to people with high body mass. Falling rates of moderate to severe obesity may even expand the company's addressable market among patients who currently are too heavy to benefit from Inspire's treatment solution. Additionally, we believe simplifications in both the airway exam and the surgical procedure used with Inspire's device will increase patient throughput, decrease backlogs and potentially accelerate revenue growth in 2024.

BSD Analysis:
Despite being the quarter's largest detractor, Wasatch maintains conviction in Inspire Medical Systems, viewing recent weakness as a misunderstood market reaction to GLP-1 drug concerns. The market's fear that weight-loss medications will reduce sleep apnea treatment demand overlooks Inspire's specific patient population constraints. The company's nerve-stimulating device cannot be prescribed to high BMI patients, meaning GLP-1-driven obesity reduction could actually expand Inspire's addressable market by bringing more patients within treatment eligibility. This creates a counterintuitive positive dynamic where successful obesity treatments increase rather than decrease Inspire's market opportunity. Operational improvements in airway examination procedures and surgical techniques should drive increased patient throughput and reduce treatment backlogs. These process enhancements position the company for accelerated revenue growth in 2024 as capacity constraints ease. Wasatch believes the market has overreacted to competitive threats while underestimating the procedural improvements and potential market expansion from obesity treatment success.

Pitch Summary:
Another strong position in the strategy was HealthEquity, Inc. (HQY). The company is the largest U.S. non-bank custodian for health savings accounts (HSAs). HealthEquity also facilitates employer-sponsored lifestyle and commuter benefits, which include fitness classes, nutrition counseling, parking programs and transit passes. As of July 31, 2023, the company's total HSA assets were up 13% from a year ago to $23.2 billion—$14.0 billion of which was held in cash with a duration of approximately three to four years. Reinvesting those funds at higher interest rates as they mature should accelerate HealthEquity's top- and bottom-line growth over the next few years. The company's commuter-benefit programs are also positioned to grow as at-home workers return to offices.

BSD Analysis:
Wasatch views HealthEquity as uniquely positioned to benefit from the current higher interest rate environment through its substantial cash management operations. As the largest U.S. non-bank HSA custodian, the company manages $23.2 billion in total HSA assets, with $14.0 billion held in cash averaging 3-4 year duration. This creates a significant reinvestment opportunity as funds mature at higher rates, directly translating to accelerated revenue and earnings growth. The 13% year-over-year growth in total HSA assets demonstrates strong underlying demand for tax-advantaged health savings products. Beyond HSAs, HealthEquity's diversified platform includes employer-sponsored lifestyle and commuter benefits, positioning for additional growth as return-to-office trends accelerate. The company's market-leading position in the expanding HSA market, combined with the interest rate tailwind from cash reinvestment, creates a compelling multi-year growth trajectory. Wasatch believes this combination of secular HSA adoption trends and cyclical interest rate benefits provides both defensive characteristics and growth potential.

Pitch Summary:
YETI Holdings, Inc. (YETI) was also a significant contributor. The company designs, markets and distributes coolers, beverage holders, and other types of outdoor and recreational gear. Last year, the stock was down because YETI issued a recall on a popular line of coolers due to defects in magnet-lined closures. That recall negatively impacted sales and earnings, especially during the important holiday shopping season. This year, YETI has benefited because the defects have been fixed and consumer spending has been strong. Going into 2023's holiday shopping season, we think the stock will be supported by the company beating year-ago revenues and earnings. We recently met with the management team in Austin, Texas. We came away from the meeting with confidence in our investment thesis: YETI offers premium products at premium prices, generates high margins, self-funds its expansion without debt, and operates in a market that allows for double-digit annual revenue and earnings growth for years on end.

BSD Analysis:
Wasatch maintains strong conviction in YETI following a successful turnaround from 2022's product recall challenges. The company has effectively resolved the magnet-lined closure defects that previously impacted sales and earnings, positioning for a strong recovery during the critical holiday shopping season. Management meetings in Austin reinforced the investment thesis around YETI's premium brand positioning and pricing power in the outdoor recreation market. The company's financial profile is particularly attractive, featuring high margins, debt-free self-funded expansion, and a sustainable competitive moat in premium outdoor gear. YETI operates in a market with significant runway for double-digit annual revenue and earnings growth over multiple years. The combination of product quality resolution, strong consumer spending trends, and the company's premium market position suggests continued outperformance. Wasatch views the previous recall as a temporary setback that has been successfully addressed, with the underlying business fundamentals remaining intact.

Pitch Summary:
The third quarter's top contributor to strategy performance was Ollie's Bargain Outlet Holdings, Inc. (OLLI). The company's stores offer a constantly changing selection of close-out items and other brand-name merchandise at deeply discounted prices. A steady flow of inventory acquired from distressed retailers has attracted customers to Ollie's and boosted sales. In the company's most recent quarter, net sales rose a better-than-expected 13.7% year over year, driven by an increase of 7.9% in comparable-store sales and the addition of six new locations. With margins and earnings also exceeding estimates, management upped its guidance for fiscal year 2023. Because the discounts at Ollie's help consumers stretch their dollars, we think the company is better situated than most other retailers in the current inflationary environment.

BSD Analysis:
Wasatch views Ollie's as exceptionally well-positioned in the current economic environment due to its defensive discount retail model. The company delivered strong Q3 results with 13.7% year-over-year net sales growth, driven by robust 7.9% comparable-store sales growth and strategic expansion with six new locations. Management's decision to raise fiscal 2023 guidance reflects confidence in the business trajectory and operational execution. The investment thesis centers on Ollie's ability to capitalize on distressed inventory from struggling retailers, creating a sustainable competitive advantage through deeply discounted brand-name merchandise. In an inflationary environment where consumers are increasingly price-conscious, Ollie's value proposition becomes more compelling, potentially driving market share gains. The combination of strong operational metrics, margin expansion, and defensive positioning suggests the company can continue outperforming peers. Wasatch believes this discount retail model provides both growth potential and downside protection during economic uncertainty.

Pitch Summary:
Headquartered in Toronto, Trisura is a specialty insurance company that operates in niche markets that rely on specialized underwriting knowledge and structuring expertise. Trisura was previously owned by Brookfield Asset Management, which spun-off Trisura in the form of a special dividend to shareholders in 2017. Brookfield's management believed that Trisura would benefit from being a standalone company with direct access to capital markets. Trisura operates 4 main types of businesses: Surety, Risk Solutions Corporate Insurance and Fronting. The Surety business, which accounts for 20.9% of 2022 net premiums written, provides surety bonds that guarantees to assume responsibility for a debt obligation in the event a party defaults. Trisura will provide contract surety bonds to ensure performance and labor and material payment for the construction industry. For developers, Trisura provides developer surety bonds to secure real estate developers' legislated deposit and warranty obligations on residential projects. For commercial enterprises and professionals, Trisura will provide commercial surety bonds, such as license and permit bonds, issued on behalf of commercial enterprises and professionals. For residential homes, Trisura will provide new home warranty insurance. Trisura is the 4th largest surety player in Canada. The Risk Solutions business, which accounts for 34.9% of 2022 net premium written, provides specialty insurance contracts, such as warranty programs and other non-standard businesses that don't fit into surety or corporate insurance. Trisura is the number 2 largest auto warranty provider in the Canadian automotive market. Corporate Insurance, which accounts for 17.7% of 2022 net premium written, include various type of insurance required for an industry or company, such as Directors' and Officers' insurance and Errors and Omission insurance for professional liability. Trisura is a top 15 insurance underwriter for Director & Officer and Errors and Omission insurance in Canada. The Fronting business, which accounts for 26.5% of its 2022 net premiums written, has been Trisura's fastest growing business. The fronting business is a fee-based business in which a self-insured company or "captive" insurer will look to a licensed insurer or "fronting" insurer to write insurance policies on its behalf. The fronting insurer will in turn cede the majority of underwriting risk to a reinsurance partner for a fee while retaining a portion of the gross premium written. In its U.S. business, Trisura aims to target a fronting fee in the range of 5% to 10% of its gross premiums, while in Canada, it targets 4% to 8% of gross premiums written. Trisura will partner with licensed brokers and managing general agents, who are wholesale brokers to generate fronting business. Trisura provides fronting for commercial auto, casualty and homeowner in both E&S and admitted markets. From an investment perspective, we believe that Trisura gives us high-quality exposure to a fast-growing niche segment of the insurance market. Trisura is a growing specialty insurance company that has a strong track record of conservative underwriting performance. Given the complexity and specialized nature of its underwriting, Trisura has less competition from traditional insurers and can charge higher premiums. From 2014 to 2022, Trisura's gross premiums written, which are premiums written before deducting expenses and commissions, and fee income increased at an annual average of 75%, while its return on equity since 2018 has been 19% and above. Trisura has developed strong and profitable relationships with program administrators, managing general agents, insurance organizations, reinsurance companies and reinsurance intermediaries to generate business opportunities. Trisura has a wide distribution network of >170 contracted insurance brokerage firms across Canada. Trisura's US growth has been supported by a strong supply of highly rated international reinsurance companies. Reinsurers prefer to work with Trisura because of its cloud-based monthly underwriting and monitoring dashboard that ensures its insurance programs adhere to agreed-upon underwriting standards. Trisura's strong supply of reinsurers enable it to generate a recurring fee, while maintaining a small risk position and right sizing its underwriting risk on a diversified base of insurance programs. Trisura has a conservative underwriting culture that limits its retention of risk by ceding it to a reinsurer. The average 5-year loss ratio in Canada was 22% and the 5-year average combined ratio was 85%. It has high-quality reinsurance counterparties, of which 83% of reinsurance recoverable are with rated reinsurers, while the remaining is 17% from unrated reinsurers that have appropriate collateral in place. Trisura requires that reinsurers post collateral if they fall below the "A" rating per AM Best insurance rating agency. In the fourth quarter of 2022, Trisura wrote down $81.5M due to one of its reinsurers that had depleting collateral that was not deemed recoverable. The counterparty had faced higher catastrophe reinsurance costs, which led to the depletion of its collateral. Trisura management has since done a thorough review of its other reinsurers to ensure that its partners meet all their requirements. As a result of this write-off, Trisura's share price had corrected to 5-year lows, which gave an attractive buying entry point in a fast growing company that has largely been de-risked. Trisura has disciplined risk management and internal control systems and policies in place that continue to evaluate and mitigate risks. Senior management also has skin in the game with share ownership of ~6% of shares outstanding. The CEO is required to hold shares of the company with a value equal to 3X his base salary, while the other executives are required to own shares of the company with a value equal to 1X their base salary. From a capital positioning perspective, Trisura has a conservative debt to capital ratio, which is below its internal target of 20% and has capital in excess of regulatory requirements. Its $1.2B investment portfolio is compromised of ~92% is in fixed income holdings that are highly liquid. Over 75% of its fixed income portfolio is in bonds with 5 years or less in maturity. Trisura has a number of growth opportunities that will help continue to support its strong double digit growth rate. In 2020, Trisura launched its fronting business in Canada, which it plans to develop and strengthen relationships with licensed brokers. This is an excellent opportunity to expand its proven fronting model from the U.S. into Canada. Similarly, Trisura will launch a surety and corporate insurance business in Canada. By leveraging its expertise and successful model, Trisura can expand its business across different geographic regions. Management views transformational and bolt-on acquisitions as further opportunities to expand and strengthen its business. With a strong capital position, multiple growth levers, conservative risk management and attractive valuation, we believe that Trisura will continue to press forward and generate outsized performance in the years to come! This is why Trisura is one of Rocklinc's top ten companies

BSD Analysis:
Rocklinc presents a compelling bull case for Trisura Group, a specialty insurance company operating in high-margin niche markets with limited competition from traditional insurers. The manager highlights Trisura's impressive 75% annual growth rate in gross premiums written from 2014-2022 and consistent 19%+ return on equity since 2018, demonstrating strong execution in a growing market segment. The company's diversified business model across four segments (Surety, Risk Solutions, Corporate Insurance, and Fronting) provides multiple growth vectors, with the fee-based Fronting business being particularly attractive as it generates recurring income with limited risk retention. Management's conservative underwriting approach is evidenced by a 22% five-year loss ratio and 85% combined ratio in Canada, while strong reinsurance relationships and collateral requirements mitigate counterparty risk. The recent $81.5M reinsurance write-down created an attractive entry point at five-year lows, with management having conducted thorough reviews to de-risk the portfolio. Strong management alignment through significant share ownership requirements and conservative capital structure with debt-to-capital below 20% provide additional downside protection. The expansion of the proven U.S. fronting model into Canada and potential for strategic acquisitions offer clear catalysts for continued double-digit growth in this specialized insurance niche.

Pitch Summary:
GE Aerospace and Safran, through their joint venture CFM International (CFMI), is the world's largest aircraft engine manufacturer. They serve the aerospace industry by developing, manufacturing, and servicing engines for airframers (such as Airbus and Boeing) and aircraft operators (airlines and lessors). CFMI came to life during the 1971 Paris Air Show, when Gerhard Neumann (GE Aerospace) and René Ravaud (Safran) decided to partner on a new engine called the CFM56, and compete head-to-head with Pratt & Whitney and Rolls-Royce. More than 50 years later, attending the Paris Air Show ourselves and meeting with the two companies, as well as multiple industry participants, our conviction rose and we initiated a position in General Electric in August alongside our position in Safran, initiated in February. There are three main quality attributes that make CFMI extraordinary in our view: 1) Huge aftermarket opportunity: Whenever an engine is sold, engine manufacturers have a decades-long, highly profitable, and highly recurring aftermarket opportunity selling spare parts and Maintenance, Repair & Overhaul (MRO) services. Consequently, even if every single customer stopped buying engines from CFMI tomorrow, the company would still have 20+ years of highly attractive free-cash-flow generation to capture via the aftermarket. 2) Significant barriers to entry: Beyond the enormous cost of development, the cost of failure is simply too high (human lives), naturally structuring the industry into an oligopoly of only three players with full-engine capabilities, trusted by regulators and customers who select only one or two engines per aircraft. China, for example, initially equipped its first homegrown aircraft (Comac C919) with a CFMI engine (LEAP) rather than its own. Aircraft engines are no easy feat. 3) Industry dominance: CFMI's most famous engine, the CFM56, has been sold >34k times over and has logged >1bn flight hours (or nearly 115,000 years of continuous flying), making it the most successful engine in civil aviation history. CFMI's most recent engine, the LEAP, is expected to follow on the CFM56 success story. Through CFM56 and LEAP, CFMI dominates the Airbus A320 and Boeing 737 platforms, which make up >75% of the global aircraft fleet. As a result, CFMI has secured a 70%+ market share of the global narrowbody engines market. Extraordinary quality attributes, by themselves, are not enough to pass our highly selective investment process and are sought to be coupled with attractive growth features. To that effect, global air traffic is on a secular growth trend, with >80% of the world's population having never set foot on a plane. Our research suggests that satisfying the growing demand for air travel will require nearly double the current active fleet of aircrafts over the next two decades, which will need to be equipped with engines, many of which are sold by CFMI. In addition, we believe we are currently in the golden era of aircraft engine aftermarket, which we expect to continue to unfold over 2024 and possibly 2025. The combination of continued strength in air travel, coupled with supply chain constraints delaying new aircraft deliveries, translates into higher-for-longer utilisation of the existing aircraft fleet, driving substantial volume and price growth across CFMI's aftermarket activity. We remain watchful of the potential implications of zero-emission targets on global air traffic and aircraft retirements, taking the perspective of both passengers and regulators into consideration. The aviation industry contributes to approximately 2% of CO2 emissions globally. Most recent engines, such as the LEAP, are 15% more fuel efficient than their predecessors, and future engines, such as the RISE, are expected to be 20% more fuel efficient than that. Beyond fuel efficiency, new propulsion methodologies, such as electricity and hydrogen, are currently under development, but will take a long time before becoming a technical reality. Finally, Sustainable Aviation Fuels (SAF) are already a technical reality but are not yet economically viable, being significantly more costly than petroleum-based fuels. Overall, we believe aircraft engine manufacturers, such as GE and Safran, are best positioned to pave the way for sustainable aviation in the future.

BSD Analysis:
Stenham initiated a position in GE following extensive research at the Paris Air Show, focusing on the company's aerospace division and its CFM International joint venture with Safran. The investment thesis centers on three key competitive advantages: a decades-long aftermarket opportunity providing recurring cash flows, significant barriers to entry creating an oligopoly structure, and dominant market share exceeding 70% in narrowbody engines. The secular growth opportunity is compelling, with over 80% of the global population never having flown and fleet requirements expected to nearly double over two decades. Current supply chain constraints are creating a 'golden era' for aftermarket services through 2024-2025 as existing aircraft utilization remains elevated. Environmental concerns are addressed through fuel efficiency improvements and the company's positioning for sustainable aviation development. GE's partnership with Safran through CFMI provides exposure to the most successful engine programs in aviation history. The combination of defensive aftermarket characteristics and secular growth drivers creates an attractive risk-adjusted return profile.

Pitch Summary:
After reaching record highs in the first half of the year, LVMH's post-pandemic euphoria gave way to early signs of a slowdown in the US, ultimately extending into Europe and translating into a softer-than-anticipated rebound in China. Having grown at 2-3 times its typical rate following the pandemic, the global personal luxury goods market is now mean reverting back to its structural growth profile and is doing so with a challenging macro backdrop. This has pressured LVMH's share price, which declined 25% from its highs and has erased most of its YTD gains. Following the recent decline, LVMH is trading at attractive valuation levels even on our conservative growth estimates, approaching previous downcycles and periods of elevated rates on a relative basis. As a result, while we remain watchful of the macro environment and its implications for LVMH's short-term growth prospects, we used the recent share price weakness to increase our position, as the long-term investment case remains attractive in our view.

BSD Analysis:
Stenham views LVMH's 25% decline from highs as a compelling buying opportunity despite near-term headwinds. The fund recognizes that luxury goods growth is normalizing from pandemic-driven acceleration of 2-3x typical rates back to structural trends. Weakness spans key markets including the US, Europe, and China, reflecting broader macro challenges rather than company-specific issues. Current valuations approach previous downcycle levels and periods of elevated interest rates, suggesting attractive entry points for long-term investors. Stenham increased its position during the weakness, demonstrating conviction in the long-term investment case. The luxury conglomerate's diversified portfolio and brand strength provide defensive characteristics during economic uncertainty. LVMH's historical ability to navigate cycles while maintaining pricing power supports the contrarian investment approach. The fund balances macro awareness with opportunistic positioning in quality luxury assets.