Merion Road Capital, an investment advisor, released its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, Merion Road Small Cap Fund returned 11.2% and 11.5% for the full year. From an attribution perspective, +5.2% came from the risk-free rate, +3.9% from our market exposure, and +2.5% from alpha. Similarly, the long-only portfolio increased by 9.8% in Q4, bringing the yearly returns to 38.7%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Merion Road Capital featured stocks such as The Duckhorn Portfolio, Inc. (NYSE:NAPA) in the fourth quarter 2023 investor letter. Headquartered in Saint Helena, California, The Duckhorn Portfolio, Inc. (NYSE:NAPA) offers wines under a portfolio of brands. On January 23, 2024, The Duckhorn Portfolio, Inc. (NYSE:NAPA) stock closed at $8.75 per share. One-month return of The Duckhorn Portfolio, Inc. (NYSE:NAPA) was -9.89%, and its shares lost 48.10% of their value over the last 52 weeks. The Duckhorn Portfolio, Inc. (NYSE:NAPA) has a market capitalization of $1.009 billion.
Merion Road Capital stated the following regarding The Duckhorn Portfolio, Inc. (NYSE:NAPA) in its fourth quarter 2023 investor letter:
“I initiated a new position in The Duckhorn Portfolio, Inc. (NYSE:NAPA) in December. NAPA is a top 3 players in the U.S. luxury wine category (as defined by bottles costing >$15), with the majority of sales coming from its Duckhorn brand and the more affordably priced Decoy label. Like their spirit and beer brethren, NAPA benefits from stable demand, established distribution, and brand equity. Unlike other alcohol categories, the wine industry is highly fragmented as small players with romantic ideations of owning their own vineyard abound. While this dynamic creates a fertile hunting ground for acquisitions, it also creates a greater level of competition that makes the business less reliable than say Jack Daniels.
It’s been tough sledding for NAPA’s stock as it has fallen ~60% over the past few years; this is a result of multiple contraction as earnings have grown. NAPA is an odd-duck (see what I did there) as the only “real” publicly traded wine company – the others are all a fraction of the size and unprofitable. This lack of comparability likely means that it receives less attention than it deserves. Additionally, investors are concerned with macro uncertainty (slow-down in the wine category, distributor destocking) and idiosyncratic issues with the company. Notably, their well-regarded CEO abruptly retired in the middle of last year. Just a few months later, and while operating with an interim CEO, NAPA announced its largest acquisition to date. Add in the fact that the majority of consideration is in the form of equity and there are reasons for investors to be worried. With the stock falling to <8x EBITDA, valuation seems compelling enough to step in…” (Click here to read the full text)
A picturesque vineyard in North America with wine barrels in storage.
The Duckhorn Portfolio, Inc. (NYSE:NAPA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held The Duckhorn Portfolio, Inc. (NYSE:NAPA) at the end of third quarter which was 20 in the previous quarter.
We discussed The Duckhorn Portfolio, Inc. (NYSE:NAPA) in another article and shared the list of best alcohol stocks to own according to hedge funds. 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.
