Alluvial Capital Management, an investment advisory firm, released its third-quarter 2023 investor letter. A copy of the same can be downloaded here. The fund fell 1.1% in the quarter compared to the Russell 2000 Index’s -5.2% return and the Russell Microcap Index’s -7.9% return. Alluvial fund is up 11.6%, YTD outperforming both the indexes. During this quarter, the fund’s performance was driven by investments in little-known securities with strong balance sheets and predictable cash flows. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Alluvial Capital Management highlighted stocks like Seneca Foods Corporation (NASDAQ:SENEA) in the third quarter 2023 investor letter. Headquartered in Fairport, New York, Seneca Foods Corporation (NASDAQ:SENEA) offers packaged fruits and vegetables. On October 31, 2023, Seneca Foods Corporation (NASDAQ:SENEA) stock closed at $54.65 per share. One-month return of Seneca Foods Corporation (NASDAQ:SENEA) was 1.54%, and its shares lost 13.42% of their value over the last 52 weeks. Seneca Foods Corporation (NASDAQ:SENEA) has a market capitalization of $415.009 million.
Alluvial Capital Management made the following comment about Seneca Foods Corporation (NASDAQ:SENEA) in its Q3 2023 investor letter:
“Finally, we have built a position in Seneca Foods Corporation (NASDAQ:SENEA). Seneca is a supplier of possibly the least glamorous product around: canned vegetables. I actually prefer the taste of certain canned veggies over fresh or frozen, but that seems to be an unpopular opinion. Still, there is a large market for canned vegetables, which appeal to the budget-conscious consumer. The market values Seneca like a relic in irreversible decline. That’s why shares trade at half of tangible book value and below net current asset value. I happen to think Seneca is in substantially better shape than the market believes, thanks to changes in the market structure of the canned vegetables industry. Simply put, there is only so much profit to go around in a mature market. Seneca earned a good share of those profits until Del Monte, in a bid for market share, cut prices and bought a small, struggling producer. This went poorly for Del Monte, which ultimately chose to exit the market, shutting down some packing plants and selling others, including to Seneca Foods. Since Del Monte exited, Seneca’s profits have bounced back. With Del Monte humbled and nobody else eager to rush in, I expect Seneca to enjoy a lengthy period of healthy profits and stable market share.
Seneca Foods shares trade at a mid-single digit multiple of 2023 profits. The company’s capital allocation is reasonably good, with shares outstanding down 22% over the last 5 years and no major investment missteps. The company’s accounting earnings can be volatile thanks to a quirk of inventory accounting. Seneca Foods is one of the few remaining public companies to employ “LIFO” (last in, first out) inventory valuation, which has the practical effect of understanding the value of its inventory by $300 million. The LIFO convention results in under-stated earnings in periods of rising input costs and over-stated earnings when input costs are falling. Nobody should mistake Seneca Foods for a growth company or a return on capital standout, but neither should shares languish at 5x earnings.”
Seneca Foods Corporation (NASDAQ:SENEA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 10 hedge fund portfolios held Seneca Foods Corporation (NASDAQ:SENEA) at the end of second quarter which was 8 in the previous quarter.
We previously discussed Seneca Foods Corporation (NASDAQ:SENEA) in another article and shared LVS Advisory’s views on the company. 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.
