Third Avenue Management, an investment management company based in New York City, released its “Small-Cap Value Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. In 2023 the fund returned 21.88% compared to a 14.65% return for the Russell 2000 Value Index. In Q4 the fund returned 9.38% versus 15.26% for the index. The returns, both absolute and relative, for the entire year were satisfactory. The past two years have seen rapid changes in equity prices due to varying interest rate outlooks. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Third Avenue Management Small-Cap Value Fund featured stocks such as Collegium Pharmaceutical, Inc. (NASDAQ:COLL) in the fourth quarter 2023 investor letter. Headquartered in Stoughton, Massachusetts, Collegium Pharmaceutical, Inc. (NASDAQ:COLL) is a specialty pharmaceutical company. On January 30, 2024, Collegium Pharmaceutical, Inc. (NASDAQ:COLL) stock closed at $33.45 per share. One-month return of Collegium Pharmaceutical, Inc. (NASDAQ:COLL) was -1.21%, and its shares gained 14.09% of their value over the last 52 weeks. Collegium Pharmaceutical, Inc. (NASDAQ:COLL) has a market capitalization of $1.091 billion.
Third Avenue Management Small-Cap Value Fund stated the following regarding Collegium Pharmaceutical, Inc. (NASDAQ:COLL) in its fourth quarter 2023 investor letter:
“Collegium Pharmaceutical, Inc. (NASDAQ:COLL) was added to the portfolio this past quarter, and the thesis is outlined below.
COLL is an abuse-deterrent opioid company. Since entering its commercialization phase in 2019, the company has benefitted by offering a competitive product to OxyContin. COLL’s lead drug (Xtampza) does not have a black box warning from the F.D.A. for pain management, which illustrates its lower abuse potential in this critical patient segment. COLL is a company we have been following for years since it announced the acquisition of its #2 competitor, BioDelivery Sciences in 2021. During that time, we have built conviction on the durability and continued growth of COLL’s future cash flows. COLL’s valuation has remained depressed, along with the broader healthcare sector. This presented a compelling entry point now that COLL has secured significantly higher margin, multi-year payer contracts because of its responsible pain management (as payers move away from Oxycontin). These contract renewals should help COLL build scale and margins and provide a well-defined path to improve its balance sheet.
The Fund initiated the investment when COLL was trading for a mere 3.2x free cash flow3, or 5.25x trailing enterprise value to trailing EBITDA4. In addition to a low absolute valuation, this investment appears to be misunderstood by investors focused purely on earnings who have not taken the time to sift through one-time items (such as settlement agreements and costs related to the extinguishment of debt) that understate the strength of its operating performance. The company has now completed a majority of its multi-year payer contracts at significantly higher margins to COLL. To underscore this development and what the market is missing, if COLL were to run its business as-is and retire its debt, we estimate it could have a $1 billion net cash position by 2027. Furthermore, if their largest potential competitor (Teva Pharmaceuticals) stays out of the market, it could produce another $1 billion of free cash flow over the next three years. The current market capitalization is roughly $1 billion…” (Click here to read the full text)
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Collegium Pharmaceutical, Inc. (NASDAQ:COLL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held Collegium Pharmaceutical, Inc. (NASDAQ:COLL) at the end of third quarter which was 21 in the previous quarter.
We discussed Collegium Pharmaceutical, Inc. (NASDAQ:COLL) in another article and shared the list of cheap NASDAQ stocks to buy. In addition, please check out our hedge fund investor letters Q4 2023 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.
