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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Cedar Grove Capital Management 2024 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Cedar Grove Capital Management)

Primary Source Intelligence • Q1 2024 Letter Analysis

Cedar Grove Capital Management Quarterly Analysis

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

Fund Returns

Digest Analysis

Quick Take

"Cedar Grove consolidated from 25 to 11 positions in Q1, returning to concentrated ownership strategy after underperforming due to failed arbitrage deals."

Executive Summary

Cedar Grove Capital returned 8.3% gross in Q1 2024 versus 10.4% for the S&P 500, underperforming primarily due to failed arbitrage trades in iRobot and Spirit Airways deals. Manager Paul Cerro consolidated the portfolio from 25 to 11 positions, exiting 14 names including RH, Match Group, and Peloton to return to an ownership strategy focused on core long positions. The letter expresses concern about excessive speculation across markets, citing frontrunning of Fed rate cuts that keep getting dialed back, AI hype without substance, crypto euphoria, and retail casino behavior in leveraged ETFs and meme stocks like Trump's SPAC. Cerro sees potential liquidity events in housing, commercial real estate, unemployment, or geopolitics that could trigger corrections. He expects continued pain in commercial real estate but notes private equity dry powder waiting for distressed opportunities. The manager maintains one arbitrage position in the Capri-Tapestry merger while focusing on asymmetric special situation trades going forward.

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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

68%

CautiousHigh

Moderate (68%)

Manager demonstrates moderate-high conviction through portfolio consolidation from 25 to 11 positions with specific reasoning for each exit. Names individual holdings with detailed commentary and sizing decisions, though maintains diversified approach rather than extreme concentration.

Growth Outlook

38%

BearishBullish

Neutral (38%)

Manager expresses caution about market conditions with concerns about excessive speculation, frontrunning, and potential correction triggers, but stops short of being strongly bearish, stating he's not trying to be bearish.

Risk Appetite

45%

DefensiveAggressive

Balanced (45%)

Portfolio was consolidated from 25 to 11 positions, representing a defensive move toward concentration, but manager maintains exposure to arbitrage and special situations, indicating selective rather than broadly defensive positioning.

Capital Deployment

38%

De-riskingDeploying

Net Neutral (38%)

Manager reduced position count from 25 to 11 by exiting 14 positions, representing net de-risking activity. While some capital was redeployed, the overall direction was toward consolidation and risk reduction.

Forward Guidance

43%

CautiousExpansionary

Neutral (43%)

Manager expects more of the same speculative behavior and is watching for potential liquidity events that could trigger corrections, but plans to continue selective deployment in special situations and arbitrage opportunities.

Language Signal

33%

BearishBullish

Bearish (33%)

Language is dominated by risk-focused terms like stupidity, absurdity, casino behavior, frontrunning, and potential correction triggers, with limited bullish language about opportunities.

Perceived Risk

72%

Low RiskElevated

Elevated Risk (72%)

Manager identifies multiple specific risk factors including excessive speculation, frontrunning behavior, potential liquidity events, and commercial real estate stress. Discusses various correction triggers in detail with concrete examples of market absurdity.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

Manager sees selective opportunities in special situations and arbitrage but emphasizes the need for patience and selectivity. Commercial real estate distress is viewed as future opportunity, but current environment characterized as requiring careful selection.

Time Horizon

62%

Short-TermLong-Term

Multi-Year (62%)

Manager discusses returning to ownership strategy with core positions, suggesting multi-year holding periods. However, also maintains focus on event-driven and arbitrage opportunities with shorter catalysts, indicating medium-term overall horizon.