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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Alluvium's concentrated value fund fell 2.3% as AI euphoria drove markets higher, creating bubble-like conditions the managers compare to dot-com era. Strong performers included Alphabet and H&R Block, while Capri and Ryanair disappointed."
Alluvium Global Fund declined 2.3% in EUR terms during Q2 2024, underperforming AI-driven markets that the managers compare to the dot-com bubble. The fund's value-oriented approach struggled against momentum in expensive technology stocks, particularly noting Nvidia's 25x revenue multiple. Key contributors included Alphabet (up 20.8%, though attributed to AI sentiment rather than fundamentals), H&R Block (up 11.1% on solid results), and McKesson (up 8.9% with raised guidance). Detractors included Capri Holdings (down 27.0% on poor results), Ryanair (down 22.3% despite good fundamentals but Boeing delivery constraints), and Thor Industries (down 20.0% on weakening RV demand). The managers increased positions in auto dealerships through Autonation while managing a CDK Global cyberattack that disrupted 15,000 dealers. Gold miners showed divergent performance despite rising gold prices. The fund ended with 19 holdings and 15.3% cash, positioning for opportunities as the managers believe high-growth companies are becoming less attractive on fundamentals despite continued price appreciation.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The fund operates with 19 concentrated positions, with top 10 holdings representing 57.9% of assets. The manager provides specific position sizing, detailed fundamental analysis for each holding, and demonstrates willingness to add to positions like Ryanair when prices fall below valuation. Clear conviction is evident in maintaining positions despite short-term underperformance.
Growth Outlook
The manager expresses significant concern about AI euphoria creating bubble-like conditions, drawing explicit parallels to the dot-com crash. They warn about index concentration risk and unsustainable valuations, suggesting caution about current market levels.
Risk Appetite
The fund maintains 15.3% cash and selectively added to positions like Ryanair and Autonation, but also trimmed some holdings due to regulatory constraints. The positioning suggests cautious deployment rather than aggressive risk-taking.
Capital Deployment
The fund made selective additions to Ryanair, Autonation, Robert Half, and Liberty Broadband while trimming some positions due to regulatory constraints. Cash level remained relatively stable at 15.3%, indicating modest net deployment activity rather than aggressive capital deployment.
Forward Guidance
The manager expects more attractive opportunities to present themselves over coming months and maintains cash for deployment. While cautious about current conditions, they express mild optimism about finding future opportunities.
Language Signal
Language is dominated by risk warnings about AI bubbles, concentration risks, and historical crash analogies. While some individual positions are described positively, the overall tone emphasizes caution and potential downside scenarios.
Perceived Risk
The manager explicitly warns of bubble-like conditions in AI stocks, draws detailed parallels to dot-com crash scenarios, and identifies specific systemic risks including index concentration and technology infrastructure vulnerabilities. Multiple risk scenarios are discussed with concrete examples and historical precedents.
Opportunity Density
The manager notes that high-growth businesses are not getting cheaper and maintains significant cash for future opportunities, suggesting the current environment offers limited attractive options. However, they express hope that opportunities will present themselves, indicating selective rather than abundant prospects.
Time Horizon
The manager demonstrates multi-year patience, noting five-year ownership of H&R Block and long-term ownership periods. They reference through-the-cycle earnings estimates for Thor Industries and maintain positions despite short-term volatility, indicating a 3-5 year investment horizon with willingness to wait for thesis realization.
