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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"McIntyre Partnerships' concentrated small-cap value strategy delivered 22% net YTD returns through Q3 2023, vastly outperforming benchmarks. The fund's largest holding OSW operates as a cruise spa quasi-monopoly with high-teens IRR potential from strong cash generation."
McIntyre Partnerships delivered strong YTD performance of 22% net through Q3 2023, significantly outperforming the Russell 2000 Value's -1% return. The fund maintains a concentrated approach with five largest positions representing 77% of assets, including cruise spa operator OSW, record labels UMG and WMG, sterilization services provider SHC, and entertainment venue SPHR. OSW stands out as the manager's highest conviction holding, operating as a quasi-monopoly in cruise ship spas with minimal cyclicality and strong cash generation potential. The business has returned to profitability with expected EBITDA of $85MM in 2023 growing to $100MM in 2024, translating to high-teens IRR potential. Record labels benefited from fading AI disruption concerns and positive developments in artist-centric models. SPHR's successful U2 opening exceeded expectations with sold-out residencies. Despite Q3 underperformance, the manager maintains conviction in existing positions while identifying new opportunities for potential rotation if small-cap volatility continues. Portfolio positioning remains nimble at 90% net long exposure.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Very high conviction evidenced by concentrated portfolio with five positions representing 77% of assets. Manager provides detailed analysis of largest holding OSW including specific financial projections, competitive positioning, and explicit willingness to add significantly on weakness. Clear thesis articulation for each major holding with specific catalysts and risk assessments.
Growth Outlook
Manager acknowledges bear market conditions and expects pullbacks from time to time. References Russell 2000 Value declining 13% off peak and describes Q3 performance as poor, though maintains that such conditions are expected in bear markets.
Risk Appetite
Portfolio maintains high net long exposure at 90% with concentrated positioning in five largest holdings representing 77% of assets. Manager expresses comfort with large position sizes and willingness to add significantly to positions like OSW if prices decline.
Capital Deployment
Portfolio positioning and sizing remain largely unchanged during Q3 with no significant cash deployment or reduction mentioned. Manager describes maintaining nimble positioning while identifying potential rotation opportunities, indicating neutral stance with slight positive bias for future deployment.
Forward Guidance
Manager has identified new investment opportunities and expresses readiness to rotate capital if small-cap volatility continues. Positioning described as nimble with plans to update partners once full positions are built, indicating selective deployment bias.
Language Signal
Language is balanced with both positive developments (OSW's best quarter since COVID, strong record label results, SPHR exceeding expectations) and risk acknowledgments (bear market, volatility, emerging business model risks). Slightly more constructive than cautious overall.
Perceived Risk
Manager acknowledges bear market conditions and expects periodic pullbacks, discusses specific risks like higher rates impacting homebuilders and consumer sentiment affecting cruise spending. However, risk discussion is moderate and balanced with opportunity identification rather than expressing alarm about systemic threats.
Opportunity Density
Manager has identified several new investment opportunities where larger positions could be taken, suggesting a reasonably rich opportunity set. References potential to rotate capital if volatility continues, indicating selective but meaningful opportunities available in the current environment.
Time Horizon
Manager demonstrates multi-year investment horizon with detailed discussion of OSW's 2024 projections and long-term competitive positioning. Emphasizes strategy of owning businesses where he would be comfortable adding significantly if seas change, indicating patience and long-term orientation rather than catalyst-dependent timing.
