Summary of HOLT Materials Conference Call Industry Overview - **Sector Performance**: The Materials sector has underperformed the broader market over the past five years, with a price increase of +60% compared to +85% for the broader market. This underperformance is attributed to weak fundamentals [2][7]. - **Recovery Signs**: Positive CFROI (Cash Flow Return on Investment) revisions are emerging, with approximately 50% of revisions indicating early stabilization. The sector remains compellingly valued, trading at a significant discount compared to the broader Developed Market [2][16]. Key Opportunities - **Containers & Packaging**: This industry offers the steepest discount among all sectors on HOLT Price-to-Book (P/B) metrics. Companies like AMCR and CCK in the US, and VID in Europe, are highlighted for their low market-implied expectations [5][68]. - **Construction Materials**: Fundamentals have weakened, with market expectations for near-term CFROI at historical highs, suggesting potential valuation risks. Companies like EXP in the US and HOLN in Europe have the highest market-implied expectations [5][68]. - **Metals & Mining**: This sector benefits from strong commodity prices, although valuations are at a premium. Gold companies like Kinross (KGC) and Zijin Mining (2899) are noted for their relative value opportunities, while copper appears expensive [5][68]. CFROI Trends - **CFROI Revisions**: The breadth of CFROI revisions has improved to about 50%, indicating early signs of stabilization after a prolonged period of negative revisions since July 2022. This improvement is largely driven by the Metals & Mining sector, which has seen strong upward revisions due to a commodity rally [16][27]. - **Forecasts**: The Materials sector is projected to see CFROI rise to 5.3% in 2026 from 4.1% in 2024, marking the first year of improvement since 2021. All industries, except Construction Materials, are expected to see CFROI improvements [27][68]. Valuation Insights - **Valuation Divergence**: Despite positive CFROI revisions, the Materials sector trades at a historically elevated discount relative to the broader Developed Market (2.0x). Containers & Packaging trades at the steepest discount to its historical levels, presenting attractive valuation opportunities [68][69]. - **Cyclical vs Defensive Chemicals**: Cyclical chemicals are at a deep discount compared to defensive chemicals, indicating potential upside for cyclical names with stronger fundamentals [75][90]. Construction Materials Insights - **Market Dynamics**: The CFROI forecast for Construction Materials is at its lowest since May 2023, with market-implied CFROI at decade highs. The spread between these metrics is the widest in over 20 years, indicating mounting valuation risks [99][100]. - **Regional Performance**: North America outperforms Europe in CFROI, driven by stronger margins, with the US showing sharper gains projected for 2023-2024 [99][100]. Containers & Packaging Sector - **Operational Weakness**: The sector is experiencing operational challenges, leading to a decade-low valuation. CFROI has declined, with forecasts remaining range-bound at ~6.0% [118][131]. - **Valuation Dispersion**: Significant valuation dispersion exists, with AMCR and CCK priced for the lowest market expectations relative to forecasts, while ATR and PKG have the highest expectations despite lower quality profiles [131][134]. Metals & Mining Sector - **Premium Valuation**: The Metals & Mining industry trades at a premium to its historical valuations, supported by strong fundamentals and positive CFROI revisions. The sector has re-rated, with HOLT P/B at approximately a 60% premium to its 10-year median [139][140]. - **Gold and Silver Valuations**: Gold offers relative value despite its premium, while silver appears expensive. Kinross and Zijin Mining are noted for their low market expectations relative to forecasts [154][158]. Paper & Forest Products Sector - **Weak Fundamentals**: The industry faces challenges such as pulp price softness and weak demand, resulting in margin compression. CFROI forecasts are near historic lows, with a projected recovery to 1.5% in 2026 [162][163]. - **Valuation Opportunities**: Despite weak fundamentals, the market is pricing in a steep improvement in CFROI, indicating potential stock-picking opportunities among companies like MNDI, LPX, and WFG [177][179]. Conclusion - The Materials sector is showing signs of recovery, with selective opportunities across Containers & Packaging, Metals & Mining, and Chemicals. However, challenges remain in Construction Materials and Paper & Forest Products, necessitating careful stock selection based on valuation and growth expectations.

Summary of Key Points from the Conference Call Industry Overview - The focus on AI investments has overshadowed other potential investment opportunities in various sectors, including semiconductors, power plants, and capital goods [1][2] - Companies not directly benefiting from AI are highlighted as compelling investment options, such as Freeport-McMoRan, which has indirect exposure to AI [1] Core Insights and Arguments - A screening of Buy-rated US stocks not included in AI/power/infrastructure ETFs identified 82 stocks with positive 3-month EPS revisions and trading below a market multiple of 26x, leading to a final list of 16 equities [2] - Savita Subramanian models an 8% return for the S&P over the next 12 months, emphasizing the importance of owning average stocks rather than the index [3] - Risks associated with AI investments include potential declines in middle-income white-collar jobs, which could impair consumer spending [3] - Hyperscalers investing heavily in AI technology may face de-rating if monetization does not meet expectations, as they currently trade at high multiples despite capital-intensive spending [3] Notable Companies and Their Performance - **Amcor PLC (AMCR)**: Recent acquisition of Berry Global is expected to enhance valuation, with EBITDA projected to approach $3.8 billion for F26 [11][12] - **AT&T Inc. (T)**: Strong performance metrics with 405k post-paid phone net additions, projecting a 9% EPS growth in 2026 [15][17] - **BGC Group**: Dominates the energy derivatives market, with expected growth in volumes due to increased power consumption driven by cloud and AI adoption [18][19] - **Church & Dwight (CHD)**: Positioned to benefit from consumer trade-down trends, with organic sales growth of 3.4% in Q3 [20][21] - **Dollar General (DG)**: Improved execution and a focus on lower price points are expected to boost sales, with a current valuation below the 5-year average [23][27] - **Freeport-McMoRan (FCX)**: Anticipates a restart of the Grasberg mine, with bullish forecasts for copper prices due to supply challenges [32][34] - **Henry Schein (HSIC)**: Transitioning to a higher-margin business model, with a target of 60% operating income from high-growth products by 2027 [38][39] - **Progressive Corp (PGR)**: Strong EPS revisions and expected dividend announcements are anticipated to drive growth [65][67] - **Walt Disney Co. (DIS)**: Growth drivers intact with expectations for double-digit growth in Entertainment operating income [80] Additional Important Insights - The market is currently cautious, providing room for multiple expansions as fundamentals improve across various sectors [14] - Regulatory improvements in Connecticut are expected to enhance Eversource's valuation [28][30] - Viking Holdings is positioned for premium valuation due to its unique brand and superior margins in the cruise industry [76][79] - The overall sentiment indicates a potential for significant investment opportunities outside the AI sector, as companies adapt to changing market dynamics and consumer behaviors [1][2][3]

Investment Returns - The total return on the Fund's net asset value for the first half of 2025 was 2.3%, with dividends and capital gains reinvested [1] - The S&P Energy Sector and the S&P 500 Materials Sector had returns of 0.8% and 6.0%, respectively, while the benchmark (S&P 500 Energy Sector 80% and S&P 500 Materials Sector 20%) returned 1.8% [1] - The total return on the Fund's market price for the same period was 3.1% [1] Annualized Comparative Returns - For the 1-year period, the Fund's net asset value (NAV) decreased by 2.2%, while the market price increased by 1.7% [4] - Over 3 years, the NAV returned 10.7% and the market price returned 12.3% [4] - The 5-year returns were 21.2% for NAV and 22.1% for market price, while the 10-year returns were 6.1% for NAV and 6.8% for market price [4] Net Asset Value - As of June 30, 2025, the Fund's net assets were $634.74 million, down from $689.99 million a year earlier [6] - The number of shares outstanding increased to 26,888,697 from 25,453,641 [6] - The net asset value per share decreased to $23.61 from $27.11 [6] Largest Equity Portfolio Holdings - The top ten equity holdings accounted for 62.9% of net assets, with Exxon Mobil Corporation at 22.7% and Chevron Corporation at 11.5% [7] - Other significant holdings included ConocoPhilips (5.3%), Linde plc (4.7%), and EOG Resources, Inc. (3.8%) [7] Industry Weightings - The Fund's net assets were allocated primarily to the energy sector, with Integrated Oil & Gas at 35.1% and Exploration & Production at 19.8% [9] - Other allocations included Storage & Transportation (11.6%), Chemicals (13.6%), and Metals & Mining (3.6%) [10]

Company Performance - Ball Corporation has recently experienced a rebound in volumes and an improved pricing mix for aluminum products [1] Investment Perspective - The analysis suggests a long-term investment horizon of 5-10 years, focusing on a portfolio that includes a mix of growth, value, and dividend-paying stocks, with a particular emphasis on value [1]