ICON plc was a new purchase and became the top contributor to our results for the second quarter. Founded in 1990 by two Irish doctors, this Dublin-based provider of clinical research services and analytics saw its stock price clobbered over the past two years due to the triple whammy of: 1/ a post-COVID-19 demand slowdown; 2/ AI-related fears; and 3/ an accounting error that led to a minor restatement of results. However, our team has followed this industry since 2019, and we bought ICON eagerly in April once the valuation became compelling. Now the accounting error has already been fixed, and leading growth indicators, such as bookings and cancellations, are encouraging. Our research suggests that ICON could be a net beneficiary of AI due to proprietary data, domain expertise, and regulatory barriers, among other factors.

Our top performer in the second quarter was ICON plc (ICLR), which gained 57%. The surge followed the release of ICLR’s delayed year-end and first-quarter results, which provided clarity on the accounting issues that had previously weighed heavily on the stock. We concluded that ICLR’s ability to generate $1 billion of free cash flow was unlikely to be materially affected and that these issues would not affect its customer relationships. With the stock trading at a free cash flow yield of approximately 15%—despite remaining, in our view, a high-quality business with attractive growth prospects—we decided to materially increase our position. The delayed results validated our assessment, showing that the restatement reduced reported revenue by less than 2% and had no material effect on the company’s cash generation.

Our top performer in the second quarter was ICON plc (ICLR), which gained 57%. The surge followed the release of ICLR’s delayed year-end and first-quarter results, which provided clarity on the accounting issues that had previously weighed heavily on the stock. We concluded that ICLR’s ability to generate $1 billion of free cash flow was unlikely to be materially affected and that these issues would not affect its customer relationships. With the stock trading at a free cash flow yield of approximately 15%—despite remaining, in our view, a high-quality business with attractive growth prospects—we decided to materially increase our position. The delayed results validated our assessment, showing that the restatement reduced reported revenue by less than 2% and had no material effect on the company’s cash generation.

During the quarter, we added modestly to our investments in Bio-Techne, SAP, and ICON Plc, indicating our positive outlook on the company's potential. The addition reflects our belief in ICON Plc's strong position within its sector and its ability to generate value for shareholders. This move aligns with our strategy to enhance our portfolio with companies that exhibit robust growth prospects and competitive advantages.

Ireland-based ICON recovered following the conclusion of an internal accounting investigation that had weighed on its shares in the first quarter. The company reported improved customer and industry spending momentum, indicating a positive shift in its operational performance and market perception.

Icon Public Limited Company ($ICLR) is a global contract drug manufacturing company we’ve followed for some time but was always too well priced to own. In February, the company disclosed an internal investigation into revenue recognition that would impact revenue by less than 2%. The stock fell 40%. We like the fundamentals of the contract drug manufacturing industry and ICON’s record $24+ billion backlog. We don’t believe the restatement should impact their margin opportunity, their existing contracts, or their ability to win new business and anticipate a significant rally after their formal restatement filing and funds again feel like they can 'trust the numbers.' We believe the company trades at a low double digit multiple of free cash flow, a fraction of its historical average and a price that materially underestimates the strength of their business.

ICON plc is a global contract research organization (CRO) that provides outsourced services to the pharmaceutical, biotechnology, and medical device industries. However, the company has faced significant challenges, including a -39.3% decline in its stock during the quarter. The pressures in the outsourced drug development end markets have continued into 2026, compounded by concerns over AI disintermediation, which allows ICON's customers to develop drugs more efficiently with significantly less labor. Additionally, ICON had to postpone its fourth quarter results announcement due to a restatement of prior years’ revenue recognition, creating uncertainty that led to our decision to exit the position.

ICON Plc (ICLR) was our primary detractor this quarter, down -39.3% following an internal Audit Committee investigation into revenue recognition practices. However, we believe the market's reaction was an overreaction, as management anticipates the revenue restatement will be less than 2% for each affected year. This issue is internal and will not materially impact ICLR's ability to serve its customers or its $1 billion of free cash flow. We used the selloff to increase our position, and with the stock trading at roughly 10x trailing earnings, we believe the shares remain materially undervalued.

ICON, a clinical trial company, was a significant detractor this quarter due to financial irregularities related to revenue recognition. The manager expressed regret for not recognizing earlier public signals regarding class actions and management culture that warranted greater skepticism. As a result, ICON was sold during the quarter, reflecting a reassessment of its value in light of these issues. The manager emphasized the importance of continuous improvement in their investment process, particularly in identifying cultural red flags.

ICON plc, the world’s largest contract research organization, delivered top and bottom-line results that exceeded expectations. Improving bookings growth pointed to stabilization and potentially recovery after a challenging past 12 months. We added to our position as we believe the cyclical slowdown in healthcare could be ending and that ICON is poised to return to steady, low double-digit EPS growth. To us, ICON remains a best-in-class operator in an essential category, and we view trailing twelve months’ share price movements as disconnected with fundamental performance.