Nordstern Capital, an investment management firm, published its third-quarter 2022 investor letter – a copy of which can be downloaded here. In its 2022 first-quarter letter, the fund emphasized that the third quarter was disappointing for the fund. The fund’s underperformance has three main reasons, but it is convinced that these same three themes that were strong headwinds last quarter are the foundation of its strong performance over the next quarters and years. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.
In its Q3 2022 investor letter, Nordstern Capital mentioned Algoma Steel Group Inc. (NASDAQ:ASTL) and explained its insights for the company. Founded in 1902, Algoma Steel Group Inc. (NASDAQ:ASTL) is a Sault Ste. Marie, Canada-based steel production company with a $718.8 million market capitalization. Algoma Steel Group Inc. (NASDAQ:ASTL) delivered a -36.91% return since the beginning of the year, while its 12-month returns are down by -39.70%. The stock closed at $6.82 per share on November 03, 2022.
Here is what Nordstern Capital has to say about Algoma Steel Group Inc. (NASDAQ:ASTL) in its Q3 2022 investor letter:
“The world is short on raw materials and energy. Nordstern Capital has increased its exposure to raw materials and energy. Recession fears may temporarily suppress demand and prices. The fundamental issue, however, is a sustainable lack of supply, caused by decade-long underinvestment. The shortages cannot be resolved in the short to medium term.
Currently suppressed stock prices offer a wonderful opportunity for our commodity businesses to buy back their own shares. For instance, Algoma Steel Group (NASDAQ:ASTL) reduced its diluted share count this year from 177 million to 111 million. Nonetheless, ASTL’s share price has come down 50%, because US HRC steel prices per ton declined in the past year from $2,000 to currently $713. Today, ASTL has $500m in net cash and a market capitalization of about $700m. The company is profitable even in the current recessionary environment. The CFO expects annual mid-cycle free cash flow generation greater than the current ASTL enterprise value. This is one illustrative example. ASTL is not alone. Many present-day commodity businesses are cash and earnings rich and can use weak stock prices for aggressive buybacks.”
Our calculations show that Algoma Steel Group Inc. (NASDAQ:ASTL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Algoma Steel Group Inc. (NASDAQ:ASTL) was in 45 hedge fund portfolios at the end of the second quarter of 2022, compared to 42 funds in the previous quarter. Algoma Steel Group Inc. (NASDAQ:ASTL) delivered a -26.11% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Algoma Steel Group Inc. (NASDAQ:ASTL) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q3 page.
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Disclosure: None. This article is originally published at Insider Monkey.
