Here’s Why Steel City Capital Holds Stake in Anterix (ATEX)

Steel City Capital, an investment management company, released its second quarter 2022 investor letter. A copy of the same can be downloaded here. The fund declined 11.2% net of fees in the second quarter, compared to a decline of 16.4% in the S&P 500 Index and 17.5% in the Russell 2000 Index. Market conditions like inflation, rate hikes, and fears of a recession affected the fund’s performance in the first half of the year. For more information on the fund’s top picks in 2022, please check its top five holdings.

Steel City Capital mentioned Anterix Inc. (NASDAQ:ATEX) in the letter and discussed its views about the company. Anterix Inc. (NASDAQ:ATEX) is a wireless communication company, headquartered in Woodland Park, New Jersey. The stock of Anterix Inc. (NASDAQ:ATEX) closed at $48.69 per share on August 15, 2022. One-month return of Anterix Inc. (NASDAQ:ATEX) rose to 17.27%, while its shares lost 15.98% of their value over the last 52 weeks. Anterix Inc. (NASDAQ:ATEX) has a market capitalization of $922.403 Million.

Here’s what Steel City Capital specifically said about Anterix Inc. (NASDAQ:ATEX) in its Q2 2022 investor letter:

“At Anterix Inc. (NASDAQ:ATEX), another quarter of *nothing* to report on the contract front. If you would have told me three years ago ATEX’s share price would be virtually unchanged from our entry point despite receiving everything it wanted from the FCC and signing three contracts and unveiling lofty financial targets, I wouldn’t have believed you.

Observers have suggested that it’s time to cut bait and begin fishing elsewhere. The challenge with the investment thesis at this juncture is that it’s going to take more than just 1-2 additional contracts to drive the shares materially higher (unless the contracts are massive). This is valid perspective – so why maintain a position? Two reasons. First, I continue to believe in the industrial logic and demand underlying the spectrum the company has on offer. Second, the investment continues to include a significant margin of safety, which as articulated above with respect to ETRN and UNTC, is clearly important to me. ATEX has a market capitalization of ~$850 million. Against this, the company has letters of intent (I know, these aren’t contracts…) totaling $450 million and is contractually entitled to another $50 million of proceeds from deals that have already been inked. The remaining stub substantially undervalues what the company is likely to realize from additional spectrum sales.

No, we haven’t (yet) made the type of money that I expected when initially entering the position, but I think it’s a relatively low-probability outcome that we see our capital permanently impaired, and I continue to believe that there is a relatively high probability that our five-year IRR will be quite satisfactory.’’

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Anterix Inc. (NASDAQ:ATEX) is not on the list of  30 Most Popular Stocks Among Hedge Funds. Per our database, Anterix Inc. (NASDAQ:ATEX) was held by 16 hedge fund portfolios at the end of the first quarter, and 19 in the previous quarter.

In another article, we discussed Anterix Inc. (NASDAQ:ATEX) and shared Steel City Capital’s views on the company in the previous quarter. For more investor letters from hedge funds and other prominent investors, you can check our hedge fund investor letters Q2 2022 page.

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