Alluvial Capital Management, an investment advisory firm, released its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund had a quiet fourth quarter rising 0.7% bringing the yearly returns to 16.4% beating benchmarks. Small-cap indexes swung drastically, surging 11% in November before falling 8% in December, despite the slight rise that may indicate calmness prevailed over the quarter. In contrast, Alluvial Fund was plodding, rising 3.3% in November and falling 0.3% in December. This stable performance despite significant volatility is in line with Alluvial’s eight-year history. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Alluvial Capital Management highlighted stocks like Crawford United Corporation (OTC:CRAWA) in its Q4 2024 investor letter. Crawford United Corporation (OTC:CRAWA) is a specialty industrial products provider. The one-month return of Crawford United Corporation (OTC:CRAWA) was -0.60%, and its shares gained 21.01% of their value over the last 52 weeks. On January 24, 2024, Crawford United Corporation (OTC:CRAWA) stock closed at $41.75 per share with a market capitalization of $147.77 million.
Alluvial Capital Management stated the following regarding Crawford United Corporation (OTC:CRAWA) in its Q4 2024 investor letter:
For the second year running, Crawford United Corporation (OTC:CRAWA) made a January acquisition, this time buying Rahn Industries for $13 million. Rahn produces HVAC coils, critically important components for Crawford’s growing Air Handling segment. I have come to accept that the market simply will not consistently capitalize Crawford United at more than 9-10 times earnings, no matter how many savvy acquisitions the company makes or how rosy the outlook. Still, it hardly matters, because Crawford reliably churns out a 20% return on equity. A company that can do that 4 years in a row doubles its book value, assuming it reinvests all earnings. There’s a lesson here, one that I would love to go back in time and teach myself at the beginning of my investing career. It’s this: buying crummy little companies with illiquid shares is a tough, tough way to make money, no matter how cheaply you buy them. You have to hope that management wakes up and decides to sell the company, or that business conditions somehow improve, or that some opportunistic competitor lobs a bid. The waiting is excruciating and the opportunity cost is ruinous. On the other hand, buying very good small companies with illiquid shares is a great way to make money! Sure, shares may stay stubbornly cheap for a while, but they eventually move in tandem with the increases in company value, and the intrinsic value of a good company is always increasing. I honestly cannot think of a case where a company, no matter how small or how illiquid its shares, doubled its earnings power in sustainable fashion over 4-5 years without its shares responding. This has been our experience with Crawford United, where shares are up 4x over our holding period despite rarely trading at a double-digit price-to-earnings multiple. EACO Corp. and Rand Worldwide Inc. also spring to mind as examples of the phenomenon.”
An engineer inspecting a HVAC system, revealing the complexity of the products.
Crawford United Corporation (OTC:CRAWA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the potential of Crawford United Corporation (OTC:CRAWA) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.