Rhizome Partners, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. For the second quarter of 2022, Rhizome Partners generated a net loss of 9.1% versus a 16.1% loss for the Standard & Poor’s 500 Index and a 14.7% loss for the National Association of Real Estate Investment Trusts (NAREIT) Index. During the quarter, the fund’s hedging efforts generated about 5.5% of gains. The hedging gains were the primary contributor to Rhizome’s outperformance in the S&P 500 and the NAREIT. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Rhizome Partners mentioned Ardagh Metal Packaging S.A. (NYSE:AMBP) and explained its insights for the company. Founded in 2021, Ardagh Metal Packaging S.A. (NYSE:AMBP) is a Luxembourg-based metal can manufacturing company with a $3.6 billion market capitalization. Ardagh Metal Packaging S.A. (NYSE:AMBP) delivered a -32.23% return since the beginning of the year, while its 12-month returns are down by -42.86%. The stock closed at $6.12 per share on August 30, 2022.
Here is what Rhizome Partners has to say about Ardagh Metal Packaging S.A. (NYSE:AMBP) in its Q2 2022 investor letter:
“Given our cautious views regarding the impact of rising interest rates on asset pricing, we have largely held off deploying the cash balance. This has helped to buffer the drawdown in the portfolio year-to-date. We did allocate an additional 3% of our partners’ capital to Ardagh Metal Packaging which has the potential to generate 100-200% return in the next three years. We are working diligently to identify good businesses with the potential for returns in the 100-300% range in the next three years. We are actively re-underwriting our existing positions to account for new risk factors such as potential gas supply issues in Europe and sustained levels of high inflation.
Ardagh Metal Packaging is another portfolio company that has us salivating. Aluminum can producers like Ardagh Metal Packaging, Ball Corporation, and Crown Holdings operate in a clubby oligopoly. The top three producers exercise price discipline and their addition to capacity means multi-year take-orpay contracts which ensure all new build capacity will be absorbed. There are strong environmental, social, and governance (ESG) mandates that favor the use of aluminum cans because they can be recycled indefinitely without degrading the cans. Cans are also more energy efficient than glass bottles and have much higher recycling rates than plastic bottles. Currently, demand exceeds supply, resulting in shortages of aluminum cans in Europe and the U.S. Importing cans is not practical, because empty cans take up a large volume of space, leading to shipping mostly empty air. Hence, cans are often produced and sold locally. Ardagh Metal Packaging shares have sold off this year after investors grew wary of whether the company had the financial means to invest heavily in growth projects and pay a cash dividend. The completion of a recent green bond offering and preferred investments by the parent company, Ardagh Group, have solved the funding gaps…” (Click here to see the full text)
Photo by Ricardo Gomez Angel on Unsplash
Our calculations show that Ardagh Metal Packaging S.A. (NYSE:AMBP) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Ardagh Metal Packaging S.A. (NYSE:AMBP) was in 25 hedge fund portfolios at the end of the second quarter of 2022, compared to 23 funds in the previous quarter. Ardagh Metal Packaging S.A. (NYSE:AMBP) delivered a 1.32% return in the past 3 months.
In June 2022, we also shared another hedge fund’s views on Ardagh Metal Packaging S.A. (NYSE:AMBP) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
