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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Alluvial Fund gained 3.6% in Q1 despite banking volatility, outperforming small-cap indices. Manager sees exceptional value opportunities in overlooked small-caps, adding Canadian transformer manufacturer Hammond Power Solutions benefiting from electrification trends."
Alluvial Fund returned 3.6% in Q1 2023, outperforming small-cap benchmarks despite banking sector volatility. Manager Dave Waters maintains his focus on small-cap value opportunities, noting the gulf between trading prices and intrinsic values is as large as he has ever observed. The portfolio benefited from strong performance in special situations, including profitable liquidation investments in biotech companies and a successful trade in newly-listed Peakstone Realty Trust. Key additions included Hammond Power Solutions, a Canadian transformer manufacturer benefiting from global electrification trends, trading at attractive valuations despite strong demand growth. The fund holds well-capitalized community banks that weathered the banking crisis better than regional peers. Waters sold GEE Group due to management's failure to return cash to shareholders, demonstrating disciplined capital allocation. Polish holdings continue to contribute despite market volatility, with one position receiving a takeover offer. The manager sees abundant opportunities in overlooked securities and special situations, maintaining conviction in his patient, value-oriented approach focused on quality companies trading at significant discounts to fair value.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Manager demonstrates high conviction through concentrated positions (P10 as largest holding at 9.1%), specific position sizing discussions, and detailed fundamental analysis of individual holdings. Names specific companies, provides valuation metrics, and explains thesis for each major position. The presence of 10+ named positions with detailed commentary and clear conviction statements supports this score.
Growth Outlook
Manager expresses constructive optimism about opportunities, stating there is no shortage of market opportunities and the gulf between prices and intrinsic values is as large as ever observed. However, acknowledges market volatility and banking crisis challenges, resulting in a moderately positive but balanced outlook.
Risk Appetite
Portfolio positioning shows selective risk-taking with new additions like Hammond Power Solutions, but also defensive moves like selling GEE Group. Manager maintains diversified approach across geographies and special situations, indicating measured rather than aggressive risk appetite.
Capital Deployment
Manager made selective moves including selling GEE Group and adding Hammond Power Solutions and other positions, but no indication of significant cash level changes or aggressive deployment. Activity appears to be rotation and selective additions rather than major capital deployment.
Forward Guidance
Manager expresses intent to continue identifying opportunities and maintains focus on ignored, overlooked securities. Language suggests continued deployment but with selectivity and patience rather than aggressive capital deployment.
Language Signal
Language contains more opportunity-focused terms (attractive, value, opportunities) than risk terms, but includes meaningful discussion of banking crisis, volatility, and challenges. Net positive but balanced tone throughout the letter.
Perceived Risk
Manager acknowledges banking crisis, interest rate pressures, and potential recession impacts on credit quality. However, risks are discussed matter-of-factly rather than with alarm, and manager expresses confidence in portfolio positioning to weather challenges.
Opportunity Density
Manager explicitly states there is no shortage of market opportunities and describes the gulf between prices and intrinsic values as the largest ever observed. Multiple new opportunities identified across geographies and special situations, indicating rich opportunity set.
Time Horizon
Manager demonstrates multi-year investment horizon through holdings like Unidata (extraordinary success over period of ownership), EACO (held for three years), and patient approach to one day stocks like Skytop Lodge. Emphasis on long-term value realization and willingness to hold through volatility indicates extended time horizon.
