Vaughan Nelson Investment Management

Q1 2026 Global SMid Strategy Recap podcasts.apple.com/us/podcast/ep-…

Q1 2026 Emerging Markets Strategy Recap podcasts.apple.com/us/podcast/ep-…

Q1 2026 International Strategy Recap podcasts.apple.com/us/podcast/ep-… @AdamRich_CAF

Q1 2026 Select Strategy Recap podcasts.apple.com/us/podcast/ep-…

Q1 2026 Value Opportunity Recap podcasts.apple.com/us/podcast/ep-…

Q1 2026 Small Cap Value Recap podcasts.apple.com/us/podcast/ep-…

Set Up of The Market and Energy Expectations: Chris Wallis, CEO and CIO at Vaughan Nelson, shares his views on the market set up coming out of 1Q26 and the current state of the energy market result from the Iran conflict. podcasts.apple.com/us/podcast/ep-…

podcasts.apple.com/us/podcast/ep-… Iran Conflict, AI and Software, and Private Credit: Chris Wallis, CEO and CIO at Vaughan Nelson, discusses thinking through the Iran conflict from an investor’s perspective, AI’s software impact, and trouble for private credit.

Capital Allocation Insights | $KHC $KHC is undergoing a real strategic reset. After a decade of share losses and operating with an ultra-lean, cost-extraction model, management is pivoting away from margin defense and toward volume-led growth. Under CEO Steven Cahillane, Kraft Heinz is stepping up reinvestment by roughly $600M, including: • R&D up ~20% • Marketing rising to ~5.5% of sales • Pricing architecture resets • Expanded sales capabilities • Simplified operating structure • Incentives now tied more directly to market share This is a material cultural shift. Cahillane is not from the 3G playbook that defined Kraft Heinz’s prior era of zero-based budgeting and extreme cost discipline. His background at Kellogg’s, Coca-Cola, and AB InBev reflects a brand-building and commercial orientation. The company is effectively saying: 2026 is the margin floor. Reinvestment today to restore competitiveness tomorrow. For years, Kraft prioritized efficiency extraction over brand investment. That protected margins — but eroded volume and share. Now the bet is that disciplined reinvestment can stabilize volume and reset the growth trajectory into 2027. The CAF question: Is this reinvestment cycle enough to rebuild brand strength in a more competitive food landscape — or is it simply repairing a decade of underinvestment? Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

Winners & Warnings - AI: First-Order Fears, Second-Order Opportunities @AdamRich_CAF podcasts.apple.com/us/podcast/ep-…

Capital Allocation Insights | $GLEN-LN $GLEN-LN left production and capex guidance unchanged — and chose to return more cash instead. CapEx: flat at ~$6.5B average through 2028. No step-change. No aggressive ramp. That includes copper growth and the Alumbrera restart — but still within the existing framework. What changed? Distributions. Glencore topped up payouts to reach ~$2B ($0.17/share) — explicitly adding to the base calculation. And instead of recycling proceeds from asset sales (Bunge, Century stake, ports, PASAR smelter) into expansion… They’re returning capital. Buybacks remain “on the table,” but management pivoted toward cash distributions after significant repurchases in prior years. That matters. Copper production is expected to step up into 2028–29. But near-term capital intensity isn’t accelerating. Like $BHP, Glencore is signaling discipline. In prior commodity cycles, elevated prices meant volume growth and rising capex. This time, even with constructive long-term copper demand, the major diversified players are prioritizing balance sheet strength and shareholder returns. The CAF question: If the largest miners are holding capex flat and distributing excess cash, who is actually funding the incremental supply? Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

Capital Allocation Insights | $INFY AI is shifting the supply curve in IT Services. Management was explicit: “AI productivity leads to compression in IT services.” That’s a remarkable admission. AI makes engineers more productive. Fewer people are required per project. Traditional labor-based billing models face pressure. Yet at the same time: • +13,000 net headcount in the last three quarters • 20,000 campus hires this year • 20,000 planned next year • Continued recruiting + massive reskilling Capacity is still expanding. Infosys’ thesis is clear: AI will compress traditional services — but AI-first services (strategy, transformation offices, governance, agentic systems, enterprise re-architecture) will more than offset it. Today, AI revenue is ~5.5% of total revenue. Management believes it can follow the digital playbook — scaling from small to majority mix over time. The bet: AI → better growth + better revenue per person + better margins. But structurally, AI also increases delivery capacity across the entire industry. If productivity rises faster than AI demand scales, utilization and pricing become the pressure point. The CAF question: Is AI creating incremental enterprise demand faster than it is expanding IT services supply — or is the industry still adding headcount into a productivity wave? Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

The Investment Judgment Series | Vol. 7 The Danger of Silent Underperformers Selling obvious losers is difficult — but at least it’s clear. The stock is down, the thesis is broken, returns on capital are deteriorating. The decision, while painful, is straightforward. The harder problem is different. What do you do with the stock that isn’t down — but isn’t advancing either? The market is up 15%. Your position is up 10%. It hasn’t collapsed. It hasn’t violated your risk limits. It simply hasn’t kept pace. These are the silent underperformers. They often look fine on the surface: stable ROIC, steady earnings, reasonable balance sheets. Nothing appears wrong. But nothing is improving meaningfully either. Incremental returns are flat. Reinvestment isn’t accelerating. The opportunity set isn’t expanding. They aren’t deteriorating — they just aren’t evolving. That’s where the risk hides. In a positively skewed market, long-term returns are driven by a small number of businesses that meaningfully improve their economics over time. Capital tied up in companies with flat trajectories dilutes exposure to those few that are bending the curve. So the more important question isn’t whether the position is down. It’s whether it is progressing. How much of your portfolio is sitting in businesses with no improving trajectory? And more importantly: Is the company investing enough to become a stock that matters? Is incremental capital becoming more productive? Is the slope of returns changing? Is the economic footprint expanding? Selling losers is about discipline. Eliminating stagnation is about standards. Flat isn’t neutral. Flat is opportunity cost. Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

Capital Allocation Insights | $CSCO Focus wins in capital allocation. Cisco Systems ( $CSCO) is down ~7% after earnings — but the bigger story isn’t the quarter. It’s the cycle. Over the past several years, Cisco has repositioned toward software, subscriptions, and security. Recurring revenue improved. Margins stabilized. Capital returns remained strong. But during that same period, one of the largest networking investment cycles in decades emerged — AI-driven data center buildouts. And the primary beneficiaries weren’t Cisco. - Arista Networks ( $ANET) captured hyperscale switching share. - Celestica ( $CLS) scaled with AI infrastructure demand. - Accton Technology ( $2345-TT) became a key ODM supplier enabling hyperscale networking buildouts. Cisco’s stock has held up relative to the broader market — but it has lagged technology and significantly trailed its most focused competitors. This isn’t about whether software is “good.” It’s about capital intensity and focus during regime shifts. When an industry enters a once-in-a-decade capex cycle, the companies tightly aligned with that spend — and reinvesting aggressively into the core bottleneck — tend to win. Repositioning toward software may improve stability. But in a hardware-led AI infrastructure cycle, focused investment wins. Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

Capital Allocation Insights | $XYZ $XYZ just announced a 10% workforce reduction. This isn’t simply cost control. It’s the downstream effect of a capital allocation thesis that didn’t hold. In 2021, $XYZ spent $27B in high-multiple equity to acquire Afterpay. The belief at the time: BNPL had a network effect. Scale early → defensibility later. But BNPL wasn’t a network business. It was distribution + underwriting + marketing spend. Dozens of competitors entered. Barriers were low. Customer switching costs were minimal. Merchants multi-homed. The “network” never hardened. Instead of reinforcing a focused, high-ROI reinvestment engine, $XYZ layered on complexity, credit exposure, and lower-margin economics. Now the unwind continues: • Afterpay repositioned as embedded infrastructure • Investment narrowed back to Cash App + Square • 10% workforce reduction to realign cost structure The key lesson isn’t about layoffs. It’s about capital diagnosis. If you mistake competitive intensity for a moat — you overpay. If you mistake distribution for a network — you overinvest. The CAF question: Has $XYZ truly rebuilt around focused reinvestment engines — or is it still digesting a deal based on a moat that never existed? In scale industries, focus compounds. In low-barrier markets, scale alone doesn’t defend. Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

The Investment Judgment Series | Vol. 6 Why We Optimize for Performance—Not Metrics A lot of investors are taught to optimize for the wrong things. Tracking error. Turnover. Style consistency. Factor purity. Those metrics are easy to measure. They’re easy to explain. And they’re often pushed by allocators. But none of them are the objective. The objective is performance. And not just relative performance — absolute performance. The math is unforgiving. Large drawdowns permanently impair capital. A 50% loss requires a 100% gain just to get back to even. So the most important thing an investor can have isn’t low tracking error or elegant factor exposure. It’s a process designed to protect against large losses. Here’s a simple stress test every investor should ask: What does your process do when the AI bubble pops? Not if it’s volatile. But if capital floods the space, capacity overwhelms demand, and returns on incremental investment collapse. Does the process: - recognize deteriorating ROIC? - adjust when reinvestment economics change? - reduce exposure when narratives detach from capital reality? - or does it stay fully invested to protect style purity and benchmarks? This isn’t about AI. Every cycle has its version. The point is that risk isn’t tracking error. Risk is permanent loss of capital. Turnover and tracking error are outputs. They are consequences of decisions — not objectives. Optimizing for performance means: - accepting discomfort - tolerating periods of looking different - prioritizing survival over smoothness - and understanding that risk is asymmetric You can recover from looking wrong. You can’t recover easily from large drawdowns. That’s why process matters more than metrics. And why optimizing for performance is ultimately about protecting capital first. Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

Capital Allocation Insights | $BHP $BHP just increased its interim dividend 46% HoH — taking payout to 60% of earnings. At the same time, it announced: • $4.3B silver streaming agreement (Antamina) • $2B WAIO power monetization • Continued portfolio high-grading The largest diversified miner in the world is not ramping production aggressively. It’s returning cash and selling non-core exposure. That matters. When the biggest player in a commodity industry chooses payouts and divestments over volume growth, it sends a signal: Capital discipline > production growth. Yes, BHP still has copper growth (brownfields, OZ Minerals integration, Jansen in potash). But the tone is clear — growth will be measured and funded within a strict capital framework. In prior cycles, miners chased volume at peak prices. This cycle, even with copper tight and long-term demand strong, the industry leader is prioritizing balance sheet strength and shareholder returns. That’s structurally bullish for supply discipline. The CAF question: If the largest miner is choosing returns over acceleration, who is actually going to close the copper supply gap? Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

Capital Allocation Insights | $MU $MU is spending like a company in a structural shortage. Fiscal ’26 CapEx was already guided at $20B+ — and the Tongluo acquisition adds another $1.8B on top. That’s more CapEx than $CVX is spending this year. Idaho 1 ramps in 2027. Idaho 2 follows. A new Singapore NAND fab begins wafer outs in 2H28. Cleanroom space is expanding across three continents. Meanwhile: – Gross margins have surged from ~18% to nearly 70%. – DRAM prices have jumped sharply. – Customers are locking in multi-year supply agreements. This is what the acceleration phase of a memory cycle looks like. When shortages hit semiconductors, double ordering follows. Customers overbook. Producers respond with greenfield builds. Capacity always comes — it just arrives late. Today the narrative is scarcity. By 2027–2028, Idaho, Tongluo, Singapore, and Korean expansions all hit supply. Markets rarely peak when shortages are most visible. They peak when investors start pricing the capacity that isn’t online yet. The CAF question: Are memory margins structurally higher this cycle — or are we watching the supply response that ultimately resets it? Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.

Capital Allocation Insights | $DASTY (Dassault Systèmes) AI is shifting the supply curve for software. If development productivity improves 30–40%, companies face a capital allocation choice: expand margins — or reinvest aggressively to increase speed, capability, and product depth. For standalone industrial software companies like Dassault Systèmes $DASTY, this decision is structural. Their economics depend on pricing power and workflow control across design, simulation, and lifecycle management. But integrated industrial players such as Siemens AG $SIE don’t rely on software as a standalone profit center. They can bundle it with hardware, automation systems, and long-term service contracts. If AI lowers development costs, they can reinvest those gains into deeper integration — or even price software more aggressively — because their return comes from the entire system, not just the license. That changes the competitive dynamic. AI doesn’t just improve margins — it compresses the barrier to building competitive tools. In a stack where industrial giants control physical assets, data, and installed bases, software becomes part of a broader capital allocation strategy. The key question for $DASTY isn’t whether AI improves productivity. It’s whether those productivity gains are reinvested fast enough to defend the moat in a world where integrated competitors can subsidize software economics from hard-asset returns. Disclaimer: Views are those of the author and not necessarily Vaughan Nelson. For educational purposes only, not investment advice. Any reliance is at your own risk. Vaughan Nelson does not guarantee accuracy. Past performance is not indicative of future results. Securities mentioned may be held in Vaughan Nelson strategies.