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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Tidefall covered costly tech shorts and bought First Horizon Bank below tangible book value at 6x earnings after TD deal collapse. Strong fundamentals, minimal bond losses, conservative real estate exposure, and Southeast growth exposure make this historically cheap valuation attractive despite regional banking headwinds and recession risks."
Tidefall Capital covered costly technology shorts and refocused on asymmetric long opportunities in undervalued small cap stocks. The manager took a position in First Horizon Bank below tangible book value at 6x trailing earnings after TD Bank abandoned its acquisition. First Horizon trades at historically cheap valuations despite strong fundamentals including industry-leading capital ratios, minimal bond losses, and conservative commercial real estate exposure. The bank operates in the fast-growing Southeast US market with strong deposit diversification and limited uninsured deposits. Key risks include continued regional banking sector pressure and potential recession impacts. However, the manager believes regulatory support will prevent widespread banking collapse and expects First Horizon to deliver mid-teens return on equity over time. The strategy shift away from short selling toward concentrated value positions in quality small caps reflects lessons learned about focusing on the manager's historical strengths in asymmetric long ideas rather than betting against overvalued names.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Manager provides detailed fundamental analysis of First Horizon with specific metrics, valuation comparisons, and insider buying evidence. However, describes it as only a small position and acknowledges past hedging mistakes, preventing higher conviction score.
Growth Outlook
Manager acknowledges attractive opportunities in old economy small caps and believes regulators will support banking sector, but also notes equity valuation concerns, potential recession, and Fed tightening pressures.
Risk Appetite
Portfolio moved from aggressive hedging with shorts to selective long positioning. Took only a small position in First Horizon despite strong conviction, suggesting measured risk appetite rather than aggressive deployment.
Capital Deployment
Manager covered all short positions (reducing gross exposure) and took only a small new long position. Net effect appears to be reduced overall portfolio risk and exposure rather than aggressive deployment.
Forward Guidance
Manager commits to focusing on asymmetric long ideas going forward and expresses confidence in First Horizon's long-term prospects, but positioning remains cautious with small position sizes.
Language Signal
Language includes positive terms like attractive valuations, industry leading metrics, and strong fundamentals, but balanced with risk language around recession, Fed tightening, and banking sector concerns.
Perceived Risk
Manager identifies specific risks including regional banking pressures, commercial real estate concerns, Fed tightening, and potential recession. Acknowledges past strategy proved costly and discusses multiple risk factors affecting the banking sector.
Opportunity Density
Manager sees many old economy small cap stocks trading at attractive valuations and found a compelling opportunity in First Horizon at historically cheap levels, suggesting a reasonably rich opportunity set in the value space.
Time Horizon
Manager discusses long-term mid-teens return on equity expectations for First Horizon and compares current valuations to 30-year history, indicating a multi-year investment horizon rather than near-term catalyst dependency.
