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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Cedar Creek Partners deploys concentrated microcap value strategy, finding exceptional opportunities in expert market securities trading at 5x earnings. Major position in Propel Media acquisition target could generate 50% fund returns if IQVIA deal closes."
Cedar Creek Partners delivered -2.5% in Q2 2023 but maintained 3.7% year-to-date returns, underperforming major indices due to bank exposure during sector contagion. The fund's 17.5-year track record shows 14.0% annualized returns, significantly outpacing all benchmarks. Manager Tim Eriksen focuses on microcap value investing, with portfolio holdings trading at 5.0x forward earnings and 4.0x earnings net of cash. The fund increased expert market exposure from 27% to 37%, deploying cash from 16% to 8% into illiquid securities offering exceptional value. Key positions include community banks benefiting from Emergency Capital Investment Program funding and a significant speculative position in Propel Media, subject to a potential $700-800 million IQVIA acquisition. Despite FTC opposition, the manager believes the deal will proceed, potentially generating 50% fund-level returns. The strategy capitalizes on regulatory-induced market inefficiencies, particularly in expert market securities where institutional buying restrictions create attractive entry points for patient capital.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Extremely high conviction evidenced by concentrated portfolio with named positions and specific sizing. Manager details exact share counts, cost basis, and position weights. Propel Media represents 5% fund weight based on speculative acquisition thesis. Clear falsifiable catalysts with specific timeframes and willingness to size positions meaningfully.
Growth Outlook
Manager expresses constructive optimism about finding attractive opportunities, particularly in expert market securities, and notes having more ideas than capital. While acknowledging some market challenges like bank contagion, the overall tone suggests a positive opportunity set.
Risk Appetite
Fund actively deployed capital by reducing cash from 16% to 8% and increased expert market exposure to 37%. Manager took a concentrated 5% position in speculative Propel Media situation, demonstrating willingness to take meaningful risk for potential outsized returns.
Capital Deployment
Significant deployment activity with cash reduced from 16% to 8% (-8 percentage points). Manager actively increased positions in multiple holdings and initiated new expert market positions, demonstrating aggressive capital deployment during the quarter.
Forward Guidance
Manager indicates continued deployment bias with room for new capital and existing partners to increase investments. However, much depends on pending court decisions and acquisition outcomes, creating a measured rather than aggressive deployment stance.
Language Signal
Language emphasizes attractive valuations, incredible opportunities, and amazing prospects in expert market. Terms like 'incredibly attractive prices' and 'amazing opportunity' dominate, with risk language limited to specific regulatory concerns rather than broad market pessimism.
Perceived Risk
Manager acknowledges specific risks including bank contagion, expert market illiquidity, and regulatory intervention in the IQVIA deal. However, these are treated as manageable challenges rather than systemic threats, with risk discussion focused on specific situations rather than broad market concerns.
Opportunity Density
Manager explicitly states having more attractive ideas than capital and sees room for additional investment. The expert market is characterized as providing the amazing opportunities they had been waiting for, suggesting a rich opportunity set in their specialized niche.
Time Horizon
Multi-year investment horizon evidenced by 17.5-year fund track record and willingness to hold through volatility. Court proceedings and acquisition timelines extend into 2024, with manager comfortable holding illiquid positions through extended periods. However, some catalyst dependency prevents higher scoring.
