Here’s Why Massif Real Assets Strategy Sold its Star Bulk Carriers (SBLK) Stake

Massif Capital, an investment management company, recently published its “Massif Real Assets Strategy” second quarter 2022 investor letter. A copy of the same can be downloaded here. In the second-quarter the fund returned -14.9% net of fees and the year-to-date return was -3%. Materials exposure of the portfolio posted losses during the quarter. You can view the top 5 holdings of the fund to know its best picks in 2022.

In the letter, Massif Capital discussed its Massif Real Assets Strategy portfolio. The fund exited Star Bulk Carriers Corp. (NASDAQ:SBLK) in the second-quarter. Star Bulk Carriers Corp. (NASDAQ:SBLK)  is a Marousi, Greece, based shipping company. The stock of Star Bulk Carriers Corp. (NASDAQ:SBLK) closed at $25.58 per share on August 5, 2022. One-month return of Star Bulk Carriers Corp. (NASDAQ:SBLK) was 13.89% and its shares gained 32.06% of their value over the last 52 weeks. Star Bulk Carriers Corp. (NASDAQ:SBLK) has a market capitalization of $2.627 billion.

Here is what Massif Real Assets Strategy specifically said about Star Bulk Carriers Corp. (NASDAQ:SBLK) in its second-quarter investor letter:

“In addition to RWE, we exited our two shipping positions, GSL and Star Bulk Carriers Corp. (NASDAQ:SBLK). We exited GSL with a loss of 16% and SBLK with a gain of roughly 31% in less than a year. We like both companies’ management teams and the macro backdrop for SBLK, so why did we exit both positions?

SBLK has a straightforward explanation. We entered the position as a capital return opportunity; we wanted to buy the dividend stream for as long as the capital position seemed secure. In total, we collected $5.6 of dividends per share in 10 months on $22 in capital at risk per share. This is a reasonable risk/return spread in our books for a capital return opportunity.

With the shift in market sentiment and economic narrative tilting toward recession, the capital deployed in the position was at significant risk in a way that the strong dividend would not compensate for. We like the shipping industry; it is a fascinating industry with significant volatility (which we like) and a useful link to the real economy that makes tracking the industry informative. But in the portfolio, shipping firms are businesses we date, not businesses we marry

The sale was a portfolio protection decision. We might miss out on a robust dividend for a few quarters, but we also believe, given the economic backdrop, we may miss out on a punishing fall in the equity. The order book for dry bulk remains very favorable; combined with fuel spreads and management, SBLK looks particularly attractive to us, but not at the current prices in the current environment. We may re-engage in the future.”

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Our research shows that Star Bulk Carriers Corp. (NASDAQ:SBLK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held Star Bulk Carriers Corp. (NASDAQ:SBLK) at the end of the first quarter which was 20 in the previous quarter.

We discussed Star Bulk Carriers Corp. (NASDAQ:SBLK)  in another article and shared the top supply chain stocks to invest. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

Disclosure: None. This article is originally published at Insider Monkey.