Steel City Capital recently released its Q4 2020 Investor Letter, a copy of which you can download here. In 2020, the fund returned 10% net of fees, while the S&P 500 Index was up 16.3%. You should check out Steel City Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.
In the Q4 2020 Investor Letter, Steel City Capital highlighted a few stocks and Anterix Inc. (NASDAQ:ATEX) is one of them. Anterix Inc. (NASDAQ:ATEX) provides wireless communications applications. In the last three months, Anterix Inc. (NASDAQ:ATEX) stock gained 19.7% and on January 20th it had a closing price of $40.27. Here is what Steel City Capital said:
“Anterix (Long): Anterix is the largest holder of “low band” 900 MHz spectrum in the United States. The company is currently repackaging its spectrum holdings in order to offer private broadband networks to the nation’s leading investor-owned utilities. Christmas came early when, on December 21st, ATEX announced it had inked its first longterm spectrum lease agreement with the utility Ameren. The agreement includes an initial 30-year lease term with a single 10-year extension option (for an additional payment) allowing for exclusive use of 6 MHz of broadband spectrum. The base contract period calls for a $48 million payment, with approximately half pre-paid by June 2021 and the balance being paid no later than 2026. ATEX’s shares rallied 50% on the day of the announcement.
The terms imply a spectrum valuation of ~$0.80/MHz-Pop4 which is important in several contexts. First, this represents a 33% premium to the average price of ~$0.60/MHz-Pop paid for 600 MHz spectrum in the counties covered by Ameren’s service territory. ATEX’s management has long promoted the idea they should be able to capture some sort of premium to 600 MHz pricing, and at least in this first contract, that assertion proved true. Nationwide, the 600 MHz auction priced at $0.93/MHz-Pop, implying a positive read through for the whole of ATEX’s spectrum holdings, assuming this type of premium holds. Second, in the weeks leading up to the announcement, ATEX’s share price implied a spectrum value around $0.30/MHz-Pop, well below the contract’s indicative price. The announcement highlighted the price-to-intrinsic value disconnect that underpins the Partnership’s investment thesis.
After the initial spike, ATEX’s shares have unfortunately given back much of their gain. It’s hard to know who has been selling and why, but my outlook is unchanged. Management reiterated their expectation for 2-3 signed contracts by the end of their fiscal year in March. I put an elevated degree of confidence in this outlook considering their more recent messaging shortcomings, of which they are keenly aware. Coupled with ongoing spectrum purchases in key markets, I fully expect the company to make good on its commitment which will bode well for our position.”
Steel City Capital has been a long time Anterix Inc. (NASDAQ:ATEX) bull. In April 2020, we shared Steel City Capital’s bullish ATEX thesis in this article.
In Q3 2020, the number of bullish hedge fund positions on Anterix Inc. (NASDAQ:ATEX) stock remained unchanged from the previous quarter (see the chart here). Our calculations showed that Anterix Inc. (NASDAQ:ATEX) isn’t ranked among the 30 most popular stocks among hedge funds.
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Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.
