McIntyre Partnerships, an investment management company released its fourth quarter investor letter. McIntyre Partnerships returned approx. 2% gross and 0% net through the end of 2024 compared to the Russell 2000 Value’s ~8% return. A copy of the letter can be downloaded here. The fund’s trailing five-year returns are about 27% gross and 22% net annually compared to benchmark’s return of about 7% annually. For the first time since 2019, the fund underperformed its benchmark in 2024, which was not a good year. The underperformance was driven by declines in several large, long-held positions in the portfolio. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
In its fourth quarter 2024 investor letter, McIntyre Partnerships emphasized stocks such as Star Holdings (NASDAQ:STHO). Star Holdings (NASDAQ:STHO) engages in the non-ground lease-related commercial real estate business. The one-month return of Star Holdings (NASDAQ:STHO) was -2.66%, and its shares lost 28.24% of their value over the last 52 weeks. On February 14, 2025, Star Holdings (NASDAQ:STHO) stock closed at $8.79 per share with a market capitalization of $117.079 million.
McIntyre Partnerships stated the following regarding Star Holdings (NASDAQ:STHO) in its Q4 2024 investor letter:
“Star Holdings (NASDAQ:STHO) is an illiquid security whose business plan is to liquidate over time. The thesis is simple: as STHO’s assets are sold off, STHO will dividend the profits and converge towards its NAV. At present, I calculate STHO’s NAV at $28 versus its current $9 trading price. I believe the liquidation will take four years, which results in a 33% IRR. While I believe there is a good probability STHO will dividend some of the proceeds along the way, I assume a bullet payment in four years for simplicity and conservatism.
STHO has two significant assets: 13.5MM shares of SAFE, a publicly traded REIT, and some legacy real estate investments with a net book value of $180MM. SAFE presently trades at $16, which, given that STHO has 13.3MM shares outstanding and an $87MM margin loan collateralized by the position, yields $10 in value per STHO share. Adding the $14 book value per share of STHO’s other assets would yield a $24 NAV. However, I believe this undervalues STHO, perhaps significantly. The liquidating real estate’s largest asset is its investment in Asbury Park, a growing beach town in New Jersey. The Asbury Park real estate has a book value of $133MM, of which $70MM is two hotels and an entertainment space currently marked at a cost of $90MM minus $20MM of accumulated depreciation. In contrast to these conservative marks, STHO’s Asbury Park investments are thriving, with hotel rooms going for $600- $1000 a night during the >90% occupancy summer season. Another $67MM is ~30 acres of beachfront land, a mark which I believe will prove conservative should Asbury Park continue to grow. For simplicity, I assume STHO’s real estate is worth an additional $50MM, yielding $18/sh.
While it may take a few years, I believe STHO offers a compelling IRR. Further, SAFE is particularly rate sensitive. Should long-term rates fall, I believe my NAV has significant upside. When the 10-year traded sub 4% in September 2024, SAFE shares traded as high as $28 a share, implying a $40 NAV.”
A close-up of a homeowner signing a mortgage document in a residential setting.
Star Holdings (NASDAQ:STHO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held Star Holdings (NASDAQ:STHO) at the end of the third quarter which was 12 in the previous quarter. While we acknowledge the potential of Star Holdings (NASDAQ:STHO) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
McIntyre Partnership added Star Holdings (NASDAQ:STHO) to its portfolio during Q1 2023. In addition, please check out our hedge fund investor letters Q3 2024 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.