The Sift No.1

_{Disclaimer: This publication is for informational purposes only and reflects general views that are not tailored to any specific investor. It does not constitute a recommendation to buy or sell any security. The Cedar Grove Capital Management LLC (“CGCM”) may hold positions in securities mentioned and may buy or sell such securities at any time without notice. Views are subject to change and are based on incomplete and preliminary analysis. Investing involves risk, including loss of principal.}

To all our clients, future clients, and current readers,

As you may or may not know, the point of our public newsletter is to accomplish a few things.

Both points being, everything we send is meant to add value in some way to your process, your knowledge base of new or existing topics, or something else. Bottom line, if we don’t think it has value, we don’t bother writing it up and sending it out.

Furthermore, we hate spam email. We hate it with a burning passion. Our inbox continues to grow as the next person pitches us a new idea, an aggregator product, or another piece of seemingly low-quality information in the name of “sending us something.”

We are not like that and have no interest in being that. As we have said in the past, we approach things with a “sniper mentality.” Sending fewer, but higher quality posts down-range instead of spraying and praying with content for the sake of making it seem like you’re getting value.

In summary, what we aim to achieve is a sense of priority in your inbox. Meaning, if you see an email from us, then you know it has value. If it doesn’t have value, then we don’t send you anything. Low frequency but high quality. Everytime.

With that, we’re going to be introducing two new newsletter sections into the mix. One, real soon, and the other is what you’re reading right now: “The Sift.”

The Sift is meant to add value by sharing with you all our notes on companies that we have been doing preliminary diligence on, and why we’re either flagging them for further diligence or passing on them for now, and why.

While we don’t always have the time to send out fully thought-out reports in length, being able to send out more quick snapshots of companies we’ve “sifted” through, in our opinion, adds value.

That’s why, going forward, we will be sending out a new edition of The Sift when we have aggregated enough of our preliminary diligence notes to send out. This is not a weekly or monthly post (i.e., a regular cadence), but on an “as warranted” basis. Again, circling back to only sending something that has value.

We’ll keep the first few editions free to give a sense of feeling for what the content will be, but after the first few, they will exclusively be going to paid subscribers of our newsletter. Once again, adding value for our premium newsletter.

With that, let’s get started.

_{Note: We hold no positions in any of the companies listed below.}

PASS → We once held Peloton as a short years ago, after it was clear that the pull-forward from COVID was coming to an end. Since our conversation with Alex Morris last year about the name, we wanted to revisit it in case things have changed for the better. Under various CEOs, the company has done well to dramatically cut costs, refinance its debt, and make an effort to reinvigorate growth. However, despite the correct moves in moving away from just B2C (moved to B2B with Hilton Hotels, residential, and gym penetration), it still doesn’t seem to be enough. Quarterly topline growth hasn’t been positive since Q3 of FY’22, and the issue still remains that demand for their hardware is still lackluster. Subscriber growth seems stable, and with high SaaS gross margins, sustainable profitability should have occurred by now. It looks like they’ve thrown everything overboard that wasn’t nailed down to the ground to stem the massive cash burn, but with a recent membership price increase, we’re not confident that their once die-hard cult base won’t churn themselves as they try to increase sales. They make a great product and offer a great service, but at current levels, we do not have a clear line of sight to normalized profitability that meets our internal hurdles.

What would change our view: Evidence of sustained subscriber growth with improving retention and clear operating leverage in the subscription segment would warrant a deeper look.

PASS → We once held a position in OWLT in 2025 and sold out before its meteoric rise. During that rise, we did share around a note that most of the appreciation in price had largely come from multiple expansion and that it wasn’t sustainable. After its fall, we wanted to revisit it. While we were initially interested in its global potential and initial foray into a subscription service, there were several things that stood out to us again once we were able to look at them through a different lens. OWLT is doing a noble service (live baby monitoring), but it’s more of a consumer product company rather than a medical device company. Yes, they do have the Babysat product (Rx required), but their penetration into the hospital NICU market is lackluster, and most of their demand comes from the DreamSock and Duo baby monitor. The early subscriber numbers are impressive, but competition from tier 1 competitors (Massimo) and second-rate Amazon products will still make it difficult to gain more attention, and the already high penetration rates in certain states seem to cap the upside. At the end of the day, we prefer companies that can expand their TAM and not just increase their AOV within a limited TAM (i.e., OWLT serving customers (parents) with their babies for, at max, a few years before they get rid of the product and no longer need the product/service).

What would change our view: We’re excited to see how the telehealth arm plays out when they eventually launch it, but until there seems to be traction on the hospital network front and further penetration rates in both the U.S. and EU, and subscriptions from the new SaaS service will be key to pay attention to.

NEEDS MORE RESEARCH → We flagged Popmart in our six themes for 2026 as a potential short candidate, and it turns out we were right. However, after the drawdown that it’s had this year, we were curious if the worst is behind it. It seems that interest in Labubu has faded as of late, with US sales down 45% y/y in March, which was a sharp reversal from the 41% gain in January and 130% gain in February. What we fear is that with a sharp rise in the hype and adoption of Labubu, it only benefits the company in the short term, and might make it follow a similar path to the recent Stanley Cup craze or Beanie Baby mania of the late ‘90s.

NEEDS MORE RESEARCH → We wrote up a note on the IPO back in March to highlight its business and valuation without much confidence in which direction it would go. Since then, the stock is down >32%. The company has done well to offer new dry products to complement its cold-pressed pouches for babies and kids. Despite the launch of new products, growth has dramatically slowed down to a mere 27% growth in 2026, down from the 57% growth the year before. Competition seems to be heating up with more and more companies expanding into the cold-pressed pouch category, namely Amazon with its 365 brand. This undercutting within a prime retail partner (Whole Foods) seems to underpin the lack of pricing power OFRM has as a premium F&B product. We still wonder if this could be a repeat of The Honest Company (HNST), where adoption was strong at first before leveling off and not providing much of a moat in an increasingly expensive retail landscape.

NEEDS MORE RESEARCH → TRNR is a home equipment company that we profiled back in 2023 that seemed to be another PTON. The company’s stock price is down 99.9% from the IPO, but it has been busy acquiring brands and trying to reinvent itself. The company closed the acquisition of Ergatta, adding a profitable, subscription‑heavy connected‑fitness business to the portfolio. Ergatta is expected to generate >$10 million of 2026 revenue with ~30% EBITDA margins and >98% monthly net retention, giving TRNR a clear path to scale and near‑term profitability. The deal cost $8.8M upfront (cash, debt, equity), with earn‑outs taking the max value to $19.5m (still under 5x EBITDA if targets are hit). TRNR also received $6.4 million from Sportstech, strengthening liquidity. Overall, the company is projecting $30 million in revenue this year. They also announced a $500k buyback, which is roughly 25% of the current market cap.

PASS → RGR is a US manufacturer of firearms and recently attracted some interest from Beretta, looking to increase its stake in the company to ~10% from the 7.7% it already owned. Yesterday, RGR agreed to allow Berreta to increase its stake in the company to 25% at a minimum tender offer of $44.80/share. Berreta will also have the right to nominate up to two independent board members, but has committed to a three-year standstill under which it will not initiate or support any proxy contest and will vote its shares in alignment with Ruger's board. RGR has seen its shares rise >22% from the start of the year, and with Berreta looking to own more of it with a minimum tender, it does meet our initial criteria for a special situations trade. However, we’re not entirely sure the current administration will allow a foreign company to scoop up another American brand, let alone one that makes weaponry.

What would change our view: While the hurdle of Berreta owning more equity has subsided, we’d like to see more of a plan for what the end goal here is, or if the company is playing the long game once the administration potentially changes and loosens its desire to be “America First.”

NEEDS MORE RESEARCH → We were flagged that Czech arms maker Colt CZ was looking for a dual listing in Amsterdam from the currently existing Prague listing, which officially took place on April 15th. The point of the dual listing is to gain more attention for the name and increase liquidity in the public markets. While the company’s stock price has done well over the last year, the defense theme has gained worldwide attention, the stock still trades below its peers (nearly 2x the current valuation) despite high single-digit topline growth and ~25% EBITDA margins. While emphasis on defense tech leans towards drones at the moment, rearmament among nations is still top of mind for a lot of military budgets, and Colt is a well-known brand in the space. While it doesn’t necessarily meet our investment criteria, it would require further work to understand the mechanics of this global business and where it sits in the view of the new world order for defense spending.

If you enjoyed reading this edition of The Sift, consider subscribing or sharing it with friends or colleagues who you think would enjoy it.

Until next time,

Paul Cerro | CIO of Cedar Grove Capital Management

Personal Twitter: @paulcerro

Fund Twitter: @cedargrovecm

Fund Website

_{Disclaimer: This publication is for informational purposes only and reflects general views that are not tailored to any specific investor. It does not constitute a recommendation to buy or sell any security. The Cedar Grove Capital Management LLC (“CGCM”) may hold positions in securities mentioned and may buy or sell such securities at any time without notice. Views are subject to change and are based on incomplete and preliminary analysis. Investing involves risk, including loss of principal.}