| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | 0% | 7% |
| 2025 | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| 7.0% | 40.3% | 28.4% | 10.3% | 32.4% | 9.0% |
Legacy Ridge Capital returned 7% net in 2025, underperforming broader markets due to high cash allocation and concentrated value approach. The fund maintains 30% cash as defensive positioning against stretched market valuations, particularly in large tech stocks where the Magnificent 7 average only 1.9% free cash flow yields. Core holdings include energy companies Mach Natural Resources and Kimbell Royalty Partners, which exemplify the firm's business-owner mentality through disciplined capital allocation and high dividend yields of 19.3% and 10.8% respectively. The portfolio's 6% dividend yield provides steady cash flow for redeployment opportunities. Management acknowledges the opportunity cost of high cash levels but views current positioning as prudent given expensive market conditions. The investment philosophy centers on buying businesses at discounts to intrinsic value based on discounted cash flows, contrasting with speculative growth stocks like Palantir trading at extreme valuations. The firm expects market corrections to create attractive buying opportunities for patient capital.
Maintain significant cash reserves to capitalize on market dislocations while focusing on undervalued dividend-paying businesses, particularly in energy sector, that demonstrate disciplined capital allocation and strong cash flow generation.
Cautiously optimistic with significant cash reserves positioned for opportunistic deployment when attractive valuations emerge. Expects continued focus on dividend-paying businesses with strong capital allocation policies while avoiding expensive growth stocks.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 30 2026 | 2025 Q4 | AAPL, AMZN, GOOGL, KRP, META, MNR, MSFT, NVDA, PII, PLTR, TSLA | Capital Allocation, Cash, dividends, energy, Exploration & Production, value | MNR | Legacy Ridge maintains 30% cash amid expensive markets, focusing on dividend-paying energy companies with strong capital allocation. Portfolio yields 6% while avoiding overvalued tech stocks. Key holdings Mach Natural Resources and Kimbell Royalty Partners offer 19.3% and 10.8% yields respectively. Positioned defensively for market correction opportunities. |
| Jul 21 2025 | 2025 Q2 | PII | Airlines, Buybacks, Capital Allocation, energy, Pipelines, value |
PII PII |
Legacy Ridge's concentrated energy and airline strategy faced headwinds in 1H25 but maintains strong positioning with 22% cash and resilient pipeline exposure. New Polaris investment represents classic value opportunity with mismanaged but fundamentally sound business trading at 15-year lows. Diverging valuations between growth and value create favorable setup for patient capital deployment. |
| Jan 31 2025 | 2024 Q4 | AAL, CEG, DAL, JBLU, KMI, LUV, NRG, RYAAY, SAVE, TLN, UAL, VST | Airlines, Capital Cycle, Concentration, energy, Midstream, Power Generation, value | - | Legacy Ridge exited power generation winners after 700%+ gains, concerned about supply overbuilding, and rotated into beaten-down airlines expecting capacity discipline to drive multi-year earnings recovery. The concentrated fund maintains capital cycle discipline, avoiding popular investments while targeting sectors where capital withdrawal creates opportunity. Elevated cash provides flexibility for future deployment. |
| Jul 29 2024 | 2024 Q2 | AMZN, EQT, ETRN, LLY, META, MSFT, NRG, NVDA, SMLP, VST | Concentration, energy, Midstream, Natural Gas, Power Generation, value |
VST SMLP EQT |
Legacy Ridge delivered 19.7% net returns through concentrated energy investments, trimming Vistra after AI-driven gains eliminated margin of safety. The fund maintains 30% cash amid limited opportunities while positioning in restructuring midstream assets and acquiring low-cost natural gas exposure through EQT merger, expecting to exploit commodity price volatility. |
| Jan 31 2024 | 2023 Q4 | CEG, CEQP, ENGH, ET, ETRN, SO, VST | Concentration, energy, nuclear, Power Generation, Utilities, value | BOAVSTB BZ | Legacy Ridge delivered 28% net returns through concentrated energy infrastructure investing, led by nuclear power generator Vistra Corp. The fund capitalizes on energy security themes and grid reliability challenges, finding assets trading at massive discounts to replacement costs. Despite strong performance, managers maintain conviction in further upside while positioning more defensively with higher cash levels. |
| Jul 28 2023 | 2023 Q2 | ETRN | - | - | |
| Jan 31 2023 | 2022 Q4 | DCP, EPD, NRG, SMLP, VST | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIManager draws parallels between today's AI-driven market concentration and the 2014-15 oil collapse, warning that AI has become a macroeconomic assumption embedded in capital expenditure plans and valuations. Physical constraints like energy intensity and grid limitations complicate AI scalability assumptions. |
Artificial Intelligence Data Centers Valuations Energy Infrastructure Technology |
EnergyEnergy plays a critical role in AI infrastructure economics through data center power consumption. Rising electricity prices and grid constraints in data-center-heavy regions are compressing margins and extending deployment timelines, creating physical bottlenecks to AI scaling. |
Electricity Data Centers Grid Infrastructure Power Pricing Utilities | |
Small CapsThe Small Cap Strategy returned 6.21% gross versus Russell 2000's 12.81% return. Manager likes the current portfolio fundamentals with strong balance sheets and resilient cash flows, though markets haven't rewarded fundamentals on a linear schedule requiring continued patience. |
Russell 2000 Value Investing Fundamentals Portfolio Management | |
| 2025 Q2 |
PipelinesBy far the biggest exposure continues to be to energy, specifically oil & gas pipelines. Pipeline fundamentals will prove resilient due to strong natural gas and natural gas liquids volumes. The holding period for the two biggest positions, both pipeline companies, is well over 5 years and any opportunity to add to them at 8%+ yields will be capitalized on despite already being close to 30% of fund assets. |
Natural Gas NGLs Midstream Energy |
AirlinesTook some airline chips off the table early in the year before cracks started to form in the demand environment, but that sector was still a drag on performance. Supply continues to exit the system so fundamentals will be quite strong once issues weighing on consumers and the economy start to improve. Have taken the opportunity to restructure the airline position and improve the risk/reward over the next couple of years. |
Air Travel Airlines Travel Supply | |
BuybacksPolaris has spent $2.4 billion on share repurchases since 2014 yet has only retired 17% of diluted shares outstanding. The issue is procyclical repurchases - highest dollar amounts spent during 2018-2022 when average prices were $134, $109, $106, $114 respectively. Management spent the least in 2019, 2020, 2024 when share prices were low. Today they could retire 20% of shares if they spent the same amount yet share repurchases doesn't make an appearance on the latest Capital Deployment Strategy slide. |
Share Repurchases Capital Allocation Valuation | |
| 2024 Q4 |
AirlinesAirlines sector experienced classic bullwhip effect post-COVID but is now showing signs of recovery with capacity discipline emerging. Industry consolidation and rationalization since 2009 has improved economics, with capacity growth at decade lows and management commentary suggesting multi-year earnings improvement similar to 2012-2014 period. |
Capacity discipline Consolidation Recovery Pricing power Capital allocation |
Independent Power ProducersIPPs benefited from AI-driven power demand expectations that exceeded stable demand projections, leading to significant stock appreciation. However, supply-side expansion concerns and volatile demand estimates create risks of overbuilding similar to early 2000s, prompting exit from positions. |
Power demand AI infrastructure Supply expansion Valuation compression Electricity generation | |
MidstreamNatural gas midstream benefits from data center power demand growth with estimates of 28 bcf/day demand increase by 2030. Capital spending remains below historical peaks but is expected to increase to meet infrastructure needs for growing hydrocarbon demand. |
Natural gas Pipeline infrastructure Data centers Capital spending Energy infrastructure | |
BuybacksShare repurchases are viewed as preferred form of capital deployment, particularly for airlines where management should repurchase meaningful amounts when markets get silly. United Airlines specifically committed to more regular cash returns to shareholders. |
Capital allocation Shareholder returns Value creation Cash deployment Management discipline | |
| 2024 Q2 |
Independent Power ProducersThe fund has been invested in IPPs like NRG and VST since 2018, with VST being their largest position entering 2023 and 2024. The AI narrative and implications for electricity demand drove VST from $26 to $107, causing the margin of safety to dissipate. The manager believes more data centers will be built requiring base load energy, and the US will likely be short base load energy. |
Power Generation Electricity Demand Data Centers Base Load AI |
MidstreamThe fund owns Summit Midstream Partners (SMLP) which is restructuring its business and balance sheet under Heath Deneke's leadership. The company divested $700mn of assets, added long-term contracts to the Double E pipeline, and announced a C-corp conversion. Total net obligations are down 63% in 4 years with leverage declining from 5.4x to 4x. |
Pipeline Natural Gas Restructuring Leverage Take-or-Pay | |
Natural GasThe fund will become owners of EQT through the ETRN acquisition, gaining exposure to the top natural gas producer in the US with a dominant Appalachian Basin position. With natural gas prices volatile and back in the low-$2s, the manager sees opportunity to exploit volatility over time and potentially increase the position size. |
Gas Producers Appalachian Basin Price Volatility Low Cost Producer Secular Demand | |
| 2023 Q4 |
NuclearNuclear power is experiencing a revival in the US with federal support through production tax credits. The fund views nuclear assets as significantly undervalued compared to replacement costs, citing Vogtle's $34 billion construction cost versus VST's acquisition of Energy Harbor at a 93% discount. Nuclear generation provides reliable baseload power that becomes increasingly valuable as grid stability challenges grow. |
Nuclear Energy Harbor Vogtle Production Tax Credit Baseload |
Energy SecurityEnergy security has become paramount following crises like the Russian invasion of Ukraine and Winter Storm Uri in Texas. The fund emphasizes how energy disruptions force countries to delay nuclear shutdowns and restart coal plants, highlighting the critical importance of reliable, non-intermittent power sources for economic prosperity and national security. |
Energy Security Grid Reliability Winter Storm Uri Ukraine Power Disruptions | |
Power GenerationThe merchant power sector benefits from increasing power scarcity and volatility as renewable intermittency creates reliability challenges. VST and similar companies are positioned to benefit from higher power prices driven by supply-demand imbalances, with the fund noting power disruptions increased 650% from 2000 to 2020. |
Power Generation Merchant Power Power Scarcity Grid Stability Electricity Prices |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 30, 2026 | Fund Letters | Kris Kelley | MNR | Mach Natural Resources LP | Energy | Oil & Gas Exploration & Production | Bull | New York Stock Exchange | capital allocation, cashflow, dividends, energy, Pdp | Login |
| Jul 21, 2025 | Fund Letters | Kris Kelley | PII | Polaris Inc. | Consumer Discretionary | Leisure Products | Bull | New York Stock Exchange | buybacks, capital allocation, Powersports, Sum-of-the-Parts, turnaround | Login |
| Jul 20, 2025 | Fund Letters | Legacy Ridge Capital | PII | Polaris Inc. | Consumer Discretionary | Leisure Products | Bull | NYSE | ATVs, boats, capital allocation, Consumer Discretionary, Cyclical, Dealership Network, Manufacturer, market leader, Motorcycles, Off-Road Vehicles, Powersports, Snowmobiles, turnaround, Value | Login |
| Jul 21, 2024 | Fund Letters | Legacy Ridge Capital | SMLP | Summit Midstream Partners LP | Energy | Oil, Gas & Consumable Fuels | Bull | NYSE | Asset Divestiture, Balance sheet restructuring, Double E Pipeline, Leverage reduction, Management Quality, midstream energy, take-or-pay contracts, turnaround | Login |
| Jul 21, 2024 | Fund Letters | Legacy Ridge Capital | EQT | EQT Corporation | Energy | Oil, Gas & Consumable Fuels | Bull | NYSE | Appalachian Basin, Commodity Exposure, Cyclical Energy, Free Cash Flow, Low-cost producer, Merger Arbitrage, Natural Gas Producer, shareholder returns | Login |
| Jul 21, 2024 | Fund Letters | Legacy Ridge Capital | VST | Vistra Corp | Utilities | Independent Power and Renewable Electricity Producers | Neutral | NYSE | Artificial Intelligence, Base Load Energy, data centers, electricity generation, Free Cash Flow, Independent Power Producer, Share Buybacks | Login |
| Jan 27, 2024 | Fund Letters | Legacy Ridge Capital | BOAVSTB BZ | Vistra Corp | Utilities | Independent Power and Renewable Electricity Producers | Bull | NYSE | acquisition, cash flow, Electricity Markets, Energy security, Grid Reliability, Nuclear Power, Nuclear PTC, Power generation, utilities, Value | Login |
| TICKER | COMMENTARY |
|---|---|
| AAPL | Apple Inc. represents 1.6% of company owned with cost basis of $6,255 million and market value of $61,962 million, providing $280 million in 2025 dividends. |
| AMZN | One company we own that we think has unique positioning to benefit from both the infrastructure and application layers is Amazon. Amazon's logistical prowess is one of the foremost moats in business today and it can and will be enhanced with AI. The company will do this in multiple ways, with better orchestration of its logistics assets and underlying cargo, as well as the buildout of more capable, sophisticated and robust robotics. Amazon is singularly well positioned to dominate the coordination layer, with AI's help, across its entire logistics network. |
| GOOGL | In the third quarter, Google, Kairos Power, and the Tennessee Valley Authority announced a major collaboration centered on a novel power purchase agreement. Google followed this announcement with another significant step forward. On October 27, Google and NextEra Energy announced plans to restart the Duane Arnold Energy Center. |
| KRP | Kimbell owns mineral rights. That means they don't own land, they don't have an obligation to drill, they don't even have to put up capital to benefit from the assets they own. KRP owns approximately 158K net royalty acres, an interest in over 131,000 wells, 68 million barrels of oil equivalent (BOE) of reserves, and produces 25,530 BOE per day. KRP has more than 14 years of drilling inventory, and a production decline rate of ~14%. Lastly, next year's dividend is expected to be $1.43/share, or a 10.8% yield. KRP's capital allocation policy stipulates that 75% of distributable cash flow be distributed to shareholders. |
| META | On January 9, Meta Platforms unveiled a new agreement with Vistra—the largest generator of competitive electricity in the United States—as well as with TerraPower and Oklo. The announcement builds on Meta's agreement last year with Constellation Energy and positions the company to become one of the largest corporate purchasers of nuclear-generated electricity in the United States. |
| MNR | Mach is different from KRP in the sense that MNR is a non-traditional exploration and production (E&P) company. The company buys or leases producing acreage and then drills additional wells when and where they think they have a knowledge or operational advantage. MNR has an interest in 12,600 operating wells, 653 million BOE of reserves, and produces 151,000 BOE/d. And finally, consensus estimates for next year's dividend are $2.20/share, or a 19.3% yield. MNR goes a few steps farther in defining four operating pillars: Maintain low leverage - 1.0x or less; Acquire cash flowing properties - Buy PDP assets at less than PV10, then focus on reducing costs; Disciplined reinvestment rate - Less than 50% of cash flow is used for drilling wells and paying down debt. The balance goes toward shareholder distributions; Maximize distributions – This pillar drives all other decisions. |
| MSFT | MSFT was a detractor in 4Q25 following its fiscal first-quarter 2026 earnings report released on October 29. While results were better than expected operationally, investor reaction was driven by guidance and capital expenditure intensity rather than headline performance. Revenue grew 17% year-over-year, exceeding consensus expectations, and Azure revenue increased 39% year-over-year, also ahead of estimates. However, management guided to a sequential deceleration in Azure growth in fiscal Q2, signaling some moderation after a period of exceptional demand. |
| NVDA | AI bellwether NVIDIA's very strong set of earnings in late November helped the AI theme re-assert its dominance when investors breathed a sigh of relief following the results. |
| PII | Our investment in Polaris (PII) last summer is a great example. Deploying 22% of our cash balance, we purchased a 7% position when the stock had over a 7% dividend yield and was trading at multi-year lows. |
| PLTR | The top three contributors to this outperformance came from Palantir Technologies (US Defense) |
| TSLA | Under the previous system, companies that produced only electric vehicles—most notably Tesla—generated large quantities of credits that could then be sold to manufacturers falling short of their EV production targets, allowing them to avoid regulatory penalties. |
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