Alphyn Capital Management, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. The fund’s Master Account returned -14.7% net in Q2 2022 vs -16.1% for the S&P500. As of June 30, 2022, the top ten positions comprised approximately 69% of the portfolio, and the portfolio held approximately 3.50% in cash. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Alphyn Capital mentioned Burford Capital Limited (NYSE:BUR) and explained its insights for the company. Founded in 2009, Burford Capital Limited (NYSE:BUR) is a Chicago, Illinois-based finance service company with a $2.3 billion market capitalization. Burford Capital Limited (NYSE:BUR) delivered a 3.13% return since the beginning of the year, while its 12-month returns are down by -4.22%. The stock closed at $10.89 per share on August 08, 2022.
Here is what Alphyn Capital has to say about Burford Capital Limited (NYSE:BUR) in its Q2 2022 investor letter:
“The most significant event affecting Burford will be the outcome of its YPF case against Argentina. Should Burford win, it could receive net proceeds between $1.1bn and $5.6bn. These numbers are derived from a formula written in YPF’s prospectus and bylaws and depend on several assumptions, hence the wide range, but in any case, are significant when compared to Burford’s current market capitalization of approximately $3bn. In a recent lengthy interview, an Argentinian legal expert concluded that based on what we know, the case should be a home run for Burford, but “we don’t know 70% of what is said, we don’t know the private documents, we don’t know the private positions. We don’t know lots of things. Experts have testified in both sides; we don’t know what’s there.” Hardly conclusive.
Nevertheless, I believe Burford remains an attractive investment regardless of the outcome of this one case. To understand why it is helpful to consider how Burford’s litigation finance works. Each case Buford funds has one of three outcomes, a win, a loss, or a settlement. A loss typically results in Buford losing its entire investment. Which has, historically, occurred 10% of the time. Given this risk, Buford actively assesses a case’s merits and potential return. A high payout on wins, typically 5x, increases the expected payout of the whole portfolio. In this way, litigation financing somewhat resembles venture capital investing, where VCs expect only a handful of big wins to make up for lost investments and still provide a reasonable return on the overall portfolio…” (Click here to see the full text)
Investments, Finance
Our calculations show that Burford Capital Limited (NYSE:BUR) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Burford Capital Limited (NYSE:BUR) was in 12 hedge fund portfolios at the end of the second quarter of 2022, compared to 10 funds in the previous quarter. Burford Capital Limited (NYSE:BUR) delivered a 46.17% return in the past 3 months.
In February 2022, we also shared another hedge fund’s views on Burford Capital Limited (NYSE:BUR) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
