Greenhaven Road Capital, an investment management company, released its third quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, the Fund returned 3% net, bringing YTD net returns to 30% net. The firm believes its portfolio is getting a little stronger with each passing day despite the challenges. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Greenhaven Road Capital highlighted stocks like Burford Capital Limited (NYSE:BUR) in the third quarter 2023 investor letter. Based in Saint Peter Port, Guernsey, Burford Capital Limited (NYSE:BUR) is a legal finance products and services provider. On October 30, 2023, Burford Capital Limited (NYSE:BUR) stock closed at $12.35 per share. One-month return of Burford Capital Limited (NYSE:BUR) was -4.69%, and its shares gained 55.26% of their value over the last 52 weeks. Burford Capital Limited (NYSE:BUR) has a market capitalization of $2.735 billion.
Greenhaven Road Capital made the following comment about Burford Capital Limited (NYSE:BUR) in its Q3 2023 investor letter:
“Burford Capital Limited (NYSE:BUR): Burford is a litigation funder that funds legal cases for a portion of the proceeds. The company’s downside is limited to the cost of funding a lawsuit, and their upside is limited only by the size of the settlement or jury award. Burford’s most successful investment to date has been YPF, where they funded a case against the government of Argentina, which privatized the YPF oil company without providing compensation to shareholders. During the third quarter, a judge in New York ruled in favor of Burford and other YPF claimants in every way possible. Burford’s share of the verdict is $6.2B and accruing interest at over $300M per year. This is quite significant relative to Burford’s $3B market capitalization, though the market is discounting the award because Argentina has a history of trying to avoid paying.
In my opinion, if Burford is going to be successful, a few massive cases like YPF will drive a significant portion of the returns. In venture capital, this dynamic is referred to as Power Law. As the investor Peter Thiel said, the “biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.” On paper, this has been the case with YPF where Burford has invested a total of $35M to date. Yes, on paper that is a 177 bagger. Burford already sold $7M of their investment for $236M, or more than a 30 bagger. It is likely that Burford will take a discount to collect their $6.2B YPF judgement but, given that their basis is only $28M whatever the discount, the returns should be eye-popping.
Over the course of the summer, we spent significant energy looking at other cases that Burford has funded. The company is intentionally opaque and will not discuss individual cases for many reasons, including confidentiality. However, after sifting through thousands of pages of court documents (via the public access resource PACER), Burford presentations, SEC filings, and news media accounts, there is reason to believe that Burford has line of sight to another multibillion-dollar award where collectability is far less of an issue than with YPF. Given the multiple sources and triangulation involved, the presentation of our analysis is far more suited to PowerPoint than a quarterly letter. We will email the presentation to all limited partners next week, but for now, rest assured I believe Burford is worth far more than the $13 per share Mr. Market has ascribed to it.”
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Burford Capital Limited (NYSE:BUR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held Burford Capital Limited (NYSE:BUR) at the end of second quarter which was 19 in the previous quarter.
We discussed Burford Capital Limited (NYSE:BUR) in another article and shared Greenhaven Road Capital’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 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.
