Artko Capital, an asset management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. For the fourth calendar quarter of 2021, an average partnership interest in Artko Capital LP was down 3.4% net of fees. At the same time, investments in the most comparable market indexes—Russell 2000, Russell Microcap, and the S&P 500—were up 2.1%, down 2.7%, and up 8.6%, respectively. For the calendar year of 2021, an average partnership interest in Artko Capital LP was up 19.4% net of fees. At the same time, investments in the aforementioned market indexes were up 14.8%, 19.3%, and 28.7%, respectively. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Artko Capital, in its Q4 2021 investor letter, mentioned The Shyft Group, Inc. (NASDAQ:SHYF) and discussed its stance on the firm. Founded in 1975, The Shyft Group, Inc. (NASDAQ:SHYF) is a Charlotte, Michigan-based specialty vehicle manufacturing company with a $1.4 billion market capitalization, and is currently spearheaded by its CEO, Daryl Adams. The Shyft Group, Inc. (NASDAQ:SHYF) delivered a -16.18% return since the beginning of the year, while its 12-month returns are up by 8.63%. The stock closed at $41.18 per share on March 18, 2022.
Here is what Artko Capital has to say about The Shyft Group, Inc. (NASDAQ:SHYF) in its Q4 2021 investor letter:
“Shyft Group (SHYF) – 8.5% of Portfolio; $9.50 cost basis/$43.00 current price
Shyft Group continued to be the resounding winner in our partnership’s history, rising 73% in 2021, over 400% in our cost basis, and over 500% from our initial investment at $8.00 in mid-2017. It is our biggest holding by market capitalization at $1.5 billion, though of course at just $280mm when we first invested in the company. As a reminder SHYF designs, engineers, manufactures, and services purpose-built specialty vehicles and chassis through its Fleet Vehicles and Service (FVS) segment for companies like UPS and Amazon and the Specialty Vehicles (SV) segment which helps to build bodies for commercial trucks, RV homes, and construction vehicles.
The company continued to deliver in 2021, with 3rd quarter revenue growth of 34% and 42% on the first nine months of 2021 and raised its year-end guidance from $925mm to $950mm as well as its EBITDA/EPS numbers to $109mm/$1.99 from $105mm/$1.85. These are incredible numbers considering in 2017 the company had less than $30mm in EBITDA and $0.46 in EPS. With the leadership of their impressive CEO, Daryl Adams, the company has transformed itself by divesting its loss-making Emergency Vehicle Segment; substantially improving operations through Daryl’s manufacturing expertise; and executing on four relatively small tuck-in acquisitions, while riding the incredible 12% organic CAGR demand for major career fleets driven by the replacement cycle and a 10% CAGR in US package volume. While the company’s stock price appreciated through its substantial growth in profitability, of course, it also benefited from multiple expansions from mid-single digit EBITDA multiples to low to mid-teens today. As always, after a run-up like this, we like to make sure that the thesis is still intact. We believe that while the current inflationary pressures are important, the company is capable of managing them while continuing to ride the demand for FVS which we do not see abating, as well as introducing Electric Vehicle products for all sizes of class of commercial vehicles. We do not believe that the company’s 2025 targets of $1.75 billion in revenue and $265mm in EBITDA (i.e. 25% CAGR) are overly aggressive as the company continues to gain operating leverage and, keeping the current forward multiples in the current low teens, should result in another doubling of the stock to $90 per share. After taking consistent profits from this position over the years, we are comfortable with the current weighting in the portfolio and look forward to seeing Mr. Adams continue to execute as he has impressively done in the past.”
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Our calculations show that The Shyft Group, Inc. (NASDAQ:SHYF) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. The Shyft Group, Inc. (NASDAQ:SHYF) was in 15 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 14 funds in the previous quarter. The Shyft Group, Inc. (NASDAQ:SHYF) delivered a -10.94% return in the past 3 months.
In February 2021, we also shared another hedge fund’s views on The Shyft Group, Inc. (NASDAQ:SHYF) in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
