Legacy Ridge Capital Management, LLC recently published its “Legacy Ridge Capital Partners Equity Fund I” fourth quarter 2022 investor letter, which can be downloaded here. In 2022, the fund returned 12.5% gross and 10.3% net of performance fees compared to a -18.1% return for the S&P 500 Index. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Legacy Ridge Capital highlighted stocks like Vistra Corp. (NYSE:VST) in its Q4 2022 investor letter. Headquartered in Irving, Texas, Vistra Corp. (NYSE:VST) is a retail electricity and power generation company. On February 1, 2023, Vistra Corp. (NYSE:VST) stock closed at $23.20 per share. One-month return of Vistra Corp. (NYSE:VST) was 1.98%, and its shares gained 4.32% of their value over the last 52 weeks. Vistra Corp. (NYSE:VST) has a market capitalization of $9.233 billion.
Legacy Ridge Capital made the following comment about Vistra Corp. (NYSE:VST) in its Q4 2022 investor letter:
“I sent the 2019 letter on February 10, 2020. Vistra Corp. (NYSE:VST) closed that day at $22.27. As I write in early January the price is $22.30. Now I did say “We would actually prefer it if both (VST & NRG) securities went nowhere for as long possible”—assuming repurchased shares at depressed valuations was our best-case scenario. But A) I didn’t think I’d be that right with respect to “nowhere”, and B) I certainly didn’t think I’d be right 3-years on. Here we are though, with the stock literally going nowhere for the last 3-years. Just like we drew it up!
“Management has indeed repurchased 20.3% of the shares outstanding since year-end 2019 and will probably repurchase another 12-15% of the outstanding shares in 2023. My initial assumption was that management could plausibly repurchase 60% of their shares by 2030, leaving them with 200mn outstanding (that assumed shares were appreciating and they had to pay more as the years went on, not what’s transpired so far), but at the current pace of about 50mn shares repurchased per year, they’ll hit that mark by the end of 2026, which would imply free cash flow of $10 pershare if the underlying business continues to perform as it currently is. That’s a 45% FCF yield on today’s price. Meanwhile, dividends per share have grown 54% since 2019 and the stock now yields 3.5%, growing about 15% a year.
Being paid to wait makes waiting much easier. We had sold VST shares in mid-2020, replacing some of the position with call options, to free up capital for other opportunities that became available. But when winter storm Uri hit Texas in February 2021 and VST shares went down 20%+, below $17 a share, we rebuilt our common equity position. Today VST oscillates between the biggest and second biggest position in the fund, depending on weekly performance.”
mitchel-willem-jacob-anneveldt-HwDN2P34n-Y-unsplash
Vistra Corp. (NYSE:VST) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held Vistra Corp. (NYSE:VST) at the end of the third quarter which was 42 in the previous quarter.
We discussed Vistra Corp. (NYSE:VST) in another article and shared the list of biggest energy stock holdings of Citadel Investment Group. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
- 19 Biggest Outdoor Brands and Companies
- 10 Hot Oil Stocks To Buy
- 10 Most Undervalued Solar Stocks to Buy
Disclosure: None. This article is originally published at Insider Monkey.
