Alluvial Capital Management, an investment advisory firm, released its fourth quarter 2022 investor letter. A copy of the same can be downloaded here. The fund returned 4.2% in the fourth quarter and it declined by 14.9% for the full year. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Alluvial Capital Management highlighted stocks like GEE Group Inc. (NYSE:JOB) in the fourth quarter investor letter. Based in Jacksonville, Florida, GEE Group Inc. (NYSE:JOB) is a staffing and placement services providing company. On February 9, 2023, GEE Group Inc. (NYSE:JOB) stock closed at $0.5350 per share. One-month return of GEE Group Inc. (NYSE:JOB) was -0.39% and its shares lost 0.93% of their value over the last 52 weeks. GEE Group Inc. (NYSE:JOB) has a market capitalization of $61.231 million.
Alluvial Capital Management made the following comment about GEE Group Inc. (NYSE:JOB) in its Q4 2022 investor letter:
“I wish I could say that all our holdings graced us with excellent earnings reports this quarter. Unfortunately, there was one significant disappointment in GEE Group Inc. (NYSE:JOB), our employment agency turnaround in progress. Shares ran up to start the fourth quarter as investors grew excited about the company’s recent successes and dirt-cheap valuation. But hopes were dashed as the company reported essentially zero profit in the fourth quarter after several consecutive quarters of healthy earnings. Revenue and gross profits were both fine, still riding high as the tight labor market rolls on. But operating costs ballooned, mostly the result of the company accruing large bonuses and incentive payments at the end of the fiscal year. I don’t have a problem with the bonuses. In a year of record revenue and profits, the staff deserve their reward. I do have an issue with the company dealing shareholders a nasty shock by cramming these bonuses into a single quarter rather than accruing them throughout the year. The news wasn’t all bad. The company still produced $1 million in free cash flow in the quarter. They indicated they expect another strongly profitable year in fiscal 2023. But the damage is done, and what was formerly a nicely performing investment now sits just below breakeven.
I can excuse a disappointing earnings report, even if it was avoidable. We are investing for what our companies will do in the years ahead, not the next quarter. What concerns me much more is GEE Group’s failure to commit publicly to a capital allocation framework. The company has been accumulating cash far in excess of its operating needs for several quarters now, yet it has not chosen to reward shareholders with a return of capital or increase its earnings power with acquisitions or internal initiatives. Back in December, the CEO promised the board would meet to consider implementing a share buyback once earnings were “digested” by the market. He also promised “good things” ahead. We’re still waiting. GEE Group will report to shareholders again in just a few weeks. I expect a much-improved report and some answers on the capital allocation question. These answers will determine whether GEE Group maintains its place in our portfolio. With so many other great opportunities out there, there’s no room for a company that repeatedly fails to deliver on its promises, no matter how optically cheap its shares may be.”
Photo by Redd on Unsplash
GEE Group Inc. (NYSE:JOB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 5 hedge fund portfolios held GEE Group Inc. (NYSE:JOB) at the end of the third quarter, which was 4 in the previous quarter.
We discussed GEE Group Inc. (NYSE:JOB) in another article and shared SRK Capital’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 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.
