Cedar Creek Partners LLC, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 8.6% was recorded by the fund for the second quarter of 2021, below the NASDAQ Index, which delivered a 9.5% return for the same period. However, the fund outperformed the S&P 500 (SPY) Index’s 8.4% return, and the Russell Micro Cap’s respectable 4.1%. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Cedar Creek Partners LLC, the fund mentioned Pendrell Corporation (NYSE: PCOA), and discussed its stance on the firm. Pendrell Corporation is a Reston, Virginia-based integrated intellectual property investment, that currently has a $171.6 million market capitalization. PCOA delivered a 81.60% return since the beginning of the year, extending its 12-month returns to 138.95%. The stock closed at $227,000.00 per share on July 23, 2021.
Here is what Cedar Creek Partners LLC has to say about Pendrell Corporation in its Q2 2021 investor letter:
“Pendrell Corporation (PCOA) bid price increased modestly from $202,000 per share to $204,000 per share in the second quarter. On June 30, the SPAC Pendrell sponsored, Holicity completed its merger with Astra (ASTR). Astra makes small rockets to send satellites into orbit. Its share price has been quite volatile.
Pendrell has 778 shares outstanding per the otcmarkets website. Pendrell owns 6,731,000 shares of Astra and warrants to buy 5,333,333 shares at $11.50 per share. That works out to 8,651 shares and 6,855 warrants of Astra for each Pendrell share. Astra closed the second quarter at $12.35 per share but so far in July has fallen to $9.17 per share. Using the lower $9.17 per share makes the value of the Astra shares equal to $79,337 per Pendrell share (8,651 shares x $9.17). In the past we used the intrinsic value of the warrants, when the market value better captures the true value. The warrants ended the quarter at $3.70 per warrant and were $3.05 as of today. Using the most recent $3.05 per warrant makes the value of the Astra warrants equal to $20,908 per Pendrell share (6,855 warrants x $3.05), resulting in a total value for Astra of $100,245 per Pendrell share. We estimate that Pendrell has cash and other investments of roughly $190,000 to $210,000 per share.
Therefore, the total value of Pendrell is roughly $300,000 per share. Pendrell brought another SPAC, Colicity (COLIU) public as well. Colicity is larger than holicity so the economics are even better than with holicity. Should Pendrell find an acceptable acquisition, total value of Pendrell would increase by roughly another $100,000 to $150,000 per share to $400,000 to $450,000 per share.”
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Based on our calculations, Pendrell Corporation (NYSE: PCOA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Pendrell Corporation (NYSE: PCOA) delivered a 8.10% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
