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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Alluvial Fund outperformed with 9.0% Q2 returns by focusing on small, profitable companies at reasonable valuations while avoiding hyper-growth stocks at extreme multiples. Key positions include Logistec Corp entering sales process and infrastructure beneficiaries Hammond Power and Preformed Line Products."
Alluvial Fund gained 9.0% in Q2 2023, outperforming benchmarks with a focus on small, underresearched profitable companies trading at reasonable valuations. The manager expresses surprise at strong results in a market rewarding hyper-growth companies at extreme multiples like C3.ai at 15x revenue while his holdings trade at 6-7x cash flow. Top holdings include P10 Inc., which qualified for Russell 2000 inclusion, and Logistec Corp., where the manager increased position size after the company initiated a sales process with expected value above $90 per share. The fund benefits from infrastructure spending themes through Hammond Power Solutions and new holding Preformed Line Products. ECIP banks struggled with sector headwinds but offer medium-term earnings potential. The manager added an unusual Expert Market position in Mechanics Bank of Richmond at attractive valuation. Despite market conditions favoring growth over value, the manager sees continued opportunities in out-of-the-way places and maintains conviction in the small-cap value approach.
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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 portfolio with named, sized positions including largest holding P10 Inc. at 8.1% and meaningful increase in Logistec position. Specific valuation targets provided (Logistec $90+ per share, Mechanics Bank $40,000+ per share) with clear thesis explanations. Portfolio concentration in top 10 holdings at 51.6% shows strong conviction in selected names.
Growth Outlook
Manager expresses surprise at good results in a market rewarding hyper-growth companies at extreme valuations, suggesting cautious optimism about his specific opportunity set while noting market dynamics don't favor his style. He sees continued opportunities but acknowledges challenging market conditions.
Risk Appetite
Fund is fully invested with concentrated positions in top holdings, added new positions like Preformed Line Products and increased Logistec meaningfully. Manager shows selective risk appetite by building positions in post-bankruptcy equity and Expert Market securities, indicating moderate risk-on positioning.
Capital Deployment
Manager increased Logistec holdings meaningfully and added new position in Preformed Line Products, indicating selective deployment. Also building positions in post-bankruptcy equity and other illiquid opportunities. No cash level changes mentioned but active position building suggests moderate deployment activity.
Forward Guidance
Manager states he does not think the opportunity set has diminished and is building positions in new areas including post-bankruptcy equity and liquidating shipping company. However, he acknowledges current market conditions don't favor his style, showing measured deployment bias.
Language Signal
Language includes positive terms like 'great business,' 'attractive,' and 'bargains' but is balanced with concerns about market dynamics, 'challenging fund-raising environment,' and pressure on financial sector. Net slightly positive but measured tone throughout.
Perceived Risk
Manager acknowledges rising interest rates pressuring financial sector and notes challenging market dynamics favoring growth over value. Mentions concerns about extreme valuations in hyper-growth companies but doesn't express systemic risk warnings. Moderate risk acknowledgment without alarm.
Opportunity Density
Manager states he sees 'no shortage of bargains' in companies that remain tethered to reality and continues to find value in out-of-the-way places. Building positions in multiple new opportunities including post-bankruptcy equity and liquidating shipping company, indicating rich opportunity set in his niche.
Time Horizon
Manager describes Rand Worldwide as a long-term holding that 'will remain so' and discusses multi-year catalysts like Logistec sales process timeline and infrastructure spending continuing 'for years to come.' Focus on companies with sustainable competitive advantages and patient approach to illiquid Expert Market positions indicates multi-year investment horizon.
