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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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Buyside Digest is not affiliated with, and does not endorse, Alluvial Capital Management. This analysis is provided for institutional research purposes only and is not investment advice.
"Alluvial Fund's boring portfolio of cash flow producers at deep discounts underperformed momentum-driven benchmarks in Q2 2026. The manager is adding to Zegona Communications at 7-8x free cash flow following a 27% pullback and participating fully in McDermott International's transformative rights offering that substantially deleverages the company."
Alluvial Fund returned 4.9% in Q2 2026 and 8.3% year-to-date, underperforming small-cap and micro-cap benchmarks experiencing a momentum-driven surge in AI and semiconductor stocks with valuations the manager finds incomprehensible. The portfolio consists of boring, dependable cash flow producers trading at large discounts to intrinsic value. Zegona Communications, the largest 2025 contributor, declined 27% from May peaks despite strong operating results and debt refinancing, prompting the manager to reverse earlier profit-taking and add on weakness at 7-8x free cash flow. McDermott International announced a transformative $500 million rights offering that will substantially deleverage the balance sheet and enable larger contract bidding, with shares trading at just 3.2x 2027 EBITDA and potential to double. Other holdings including Garrett Motion, Talen Energy, and GreenDot have clear catalysts ahead. The manager maintains conviction that portfolio discounts to intrinsic value will diminish over time and sees numerous opportunities in companies shunned by momentum-focused investors, emphasizing patience and a longer-term view.
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