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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Pelican Bay Capital Management 2024 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (Pelican Bay Capital Management)

Primary Source Intelligence • Q2 2024 Letter Analysis

Pelican Bay Capital Management Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Pelican Bay Capital Management. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Annualized+8.8%

Digest Analysis

Quick Take

"Concentrated value fund underperformed in Q2 due to earnings disappointments from key holdings, but manager remains confident in portfolio quality. Companies trade at 13.5x forward P/E with superior margins and returns versus benchmark."

Executive Summary

Pelican Bay Capital Management's Concentrated Value Portfolio declined 6.3% in Q2 2024 versus the Russell 1000 Value Index's 2.2% decline, primarily due to disappointing earnings from Builders FirstSource, CVS Health, and Corpay, while regulatory concerns around the Tapestry-Capri merger also weighed on performance. The fund employs a concentrated value strategy targeting high-quality companies with durable competitive advantages trading at steep discounts to intrinsic value. Portfolio companies demonstrate superior fundamentals with higher operating margins and returns on invested capital than the index while trading at 13.5x forward P/E versus 16.3x for the benchmark. Key portfolio activity included repurchasing Builders FirstSource shares at $141 after selling at $187, trimming Alphabet following strong earnings, adding to CVS and Expedia on weakness, and initiating a new position in Ulta Beauty. The manager believes the portfolio's higher-quality companies should eventually trade at premiums to the market, driving superior long-term returns as valuations transition from current discounts.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

78%

CautiousHigh

High Conviction (78%)

High conviction demonstrated through concentrated 20-stock portfolio with named positions and specific price targets. Manager provides detailed intrinsic value ranges (BLDR $130-$200, ULTA $480-$650) and specific entry/exit prices. Willing to repurchase on weakness and trim on strength shows strong conviction in valuations. Clear thesis per holding with specific catalysts and timeframes.

Growth Outlook

25%

BearishBullish

Bearish (25%)

Manager expresses constructive but measured optimism about the portfolio companies and their long-term prospects. While disappointed with Q2 results, believes poor performance will prove temporary and expects higher-quality companies to eventually trade at premiums. No broad market commentary but positive on specific holdings.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

Portfolio is fully invested with less than 1% cash and manager actively added to positions on weakness (CVS, Expedia) and initiated new position (Ulta). However, also trimmed Alphabet on strength, showing disciplined approach rather than maximum risk-on positioning.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

Moderate deployment activity with portfolio moving to fully invested (less than 1% cash) from adding to CVS and Expedia positions plus initiating new ULTA position. However, also trimmed Alphabet, suggesting rotation rather than net new capital deployment. No specific cash level changes mentioned.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

Manager indicates selective deployment bias by adding to positions on weakness and initiating new position in Ulta. Expects to continue concentrated approach but shows discipline in trimming overvalued positions. Moderate deployment activity rather than aggressive scaling.

Language Signal

15%

BearishBullish

Bearish (15%)

Language is balanced with mix of disappointment about Q2 results and confidence in long-term prospects. Uses terms like 'attractive', 'undervalued', and 'superior returns' but also acknowledges 'disappointing' results and 'negative events'. Slightly more positive than negative overall.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Manager acknowledges standard risks of concentrated approach including potential higher volatility and negative alpha periods when multiple holdings face simultaneous negative events. Discusses specific risks around regulatory hurdles for Tapestry-Capri deal. Moderate risk awareness without systemic concerns.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

Manager sees selective opportunities with ability to add to existing positions on weakness and initiate new position in Ulta. Emphasizes that great companies only trade below intrinsic value every 3-4 years, suggesting opportunities require patience but are available for disciplined investors.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

Multi-year investment horizon with focus on intrinsic value realization over time. Manager expects transition from discount to premium valuations to drive returns and emphasizes that great companies rarely trade below value. Willing to hold through short-term volatility as evidenced by maintaining positions despite Q2 underperformance.