Steel City Capital, an investment management company, released its third-quarter 2022 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund declined 7.9% net of fees and expenses. For the nine months in 2022, the fund fell 18.2%, net of fees and expenses. Most of the fund’s decline in the quarter happened in August, as some of the fund’s short positions rallied against the fund in the month. For more information on the fund’s top picks in 2022, please check its top five holdings.
Steel City Capital highlighted stocks like EchoStar Corporation (NASDAQ:SATS) in the Q3 2022 investor letter. Headquartered in Englewood, Colorado, EchoStar Corporation (NASDAQ:SATS) is a global networking technologies and services provider. On November 10, 2022, EchoStar Corporation (NASDAQ:SATS) stock closed at $17.91 per share. One-month return of EchoStar Corporation (NASDAQ:SATS) was 1.99% and its shares lost 40.83% of their value over the last 52 weeks. EchoStar Corporation (NASDAQ:SATS) has a market capitalization of $1.521 billion.
Steel City Capital made the following comment about EchoStar Corporation (NASDAQ:SATS) in its Q3 2022 investor letter:
“Virtually all of the Partnership’s year-to-date decline emanates from our long book. In aggregate, our short positions have partially offset this performance. Outsized declines have come from EchoStar Corporation (NASDAQ:SATS) and Anterix (ATEX). With SATS, I think we “bought well” in the sense that our position was established at an average price of $23.40 vs. the most recent price of $17.40. There certainly remains the risk we’ve invested in a “value-trap” / “melting-ice cube,” but I’ll try to explain why I think that outlook isn’t completely accurate.
I tend to think of SATS as an iceberg whose peak – the portion visible above water – reflects only a small part of its totality. The visible portion is the company’s legacy satellite broadband business that, at the current time, is shedding customers at an unhealthy clip. The main culprit is most likely Elon Musk’s Starlink, which currently offers more attractive speeds (100 Mbps) and lower latency. Maybe I’m being pollyannish about the situation, but I believe when SATS brings its Jupiter 3 satellite online next year, and is capable of delivering the same speeds as Starlink, churn will not only slow, but subscriber counts should begin to rebound. SATS will never be competitive with respect to latency, but that doesn’t keep me up at night. That’s not to discount the draw of low latency, which is important for use cases such as video conferencing and gaming, but when your target customer base is scraping by with max speeds of just 25 Mbps, the prospect of 100 Mbps should be highly attractive. Moreover, as I’ve discussed in prior communications, the financial case for Starlink is unproven and it remains to be seen whether or not Musk can ever make the unit economics work…” (Click here to read the full text)
Photo by Mika Baumeister on Unsplash
EchoStar Corporation (NASDAQ:SATS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held EchoStar Corporation (NASDAQ:SATS) at the end of the second quarter, which was 30 in the previous quarter.
We discussed EchoStar Corporation (NASDAQ:SATS) in another article and shared stocks to sell now according to David Einhorn’s Greenlight Capital. In addition, please check out our hedge fund investor letters Q3 2022 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.
