Madison Investments, an investment advisor, released its “Madison Small Cap Fund” first-quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the fund (Class Y) returned 5.69% compared to a 2.74% rise for the Russell 2000 and a 3.39% increase for the Russell 2500 Index. Holdings in the Consumer Discretionary sector and low exposure to Financials, particularly regional banks drove the fund’s performance in the quarter. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Madison Small Cap Fund highlighted stocks like Texas Capital Bancshares, Inc. (NASDAQ:TCBI) in the first quarter 2023 investor letter. Headquartered in Dallas, Texas, Texas Capital Bancshares, Inc. (NASDAQ:TCBI) is a bank holding company for Texas Capital Bank. On June 28, 2023, Texas Capital Bancshares, Inc. (NASDAQ:TCBI) stock closed at $51.18 per share. One-month return of Texas Capital Bancshares, Inc. (NASDAQ:TCBI) was 7.57%, and its shares lost 2.77% of their value over the last 52 weeks. Texas Capital Bancshares, Inc. (NASDAQ:TCBI) has a market capitalization of $2.45 billion.
Madison Small Cap Fund made the following comment about Texas Capital Bancshares, Inc. (NASDAQ:TCBI) in its first quarter 2023 investor letter:
“We believe 2022 will be remembered as the rise of inflation and broken supply chains. Thus far, 2023 is the year of higher interest rates and the ensuing impacts on our economy. The rate of inflation slowed dramatically, and the job market remained relatively resilient in the quarter. But, the recent failures of Silicon Valley Bank and Signature Bank were signs of financial stresses caused by the Fed’s rapid rate increases. When the Fed raises rates, things break. However, we don’t always know where they will break or how. This was the principal reason why we sold three of our regional bank investments last year. As we wrote in our second quarter letter, we consolidated those sales into a turnaround story, Texas Capital Bancshares, Inc. (NASDAQ:TCBI). Not only was our decision to exit most of our bank investments prescient, but TCBI has also been relatively resilient amid the crisis. Our thesis was that this idiosyncratic turnaround, selling at a deep discount to our PMV estimate, could withstand the system shock the Fed intentionally induced. Last year TCBI sold a noncore insurance business to Truist, leaving it over-capitalized and flush with liquidity. As part of the turnaround process, management was more focused on cleaning up its credit profile versus growing the loan portfolio. In short, this bank turnaround was about taking risk out as opposed to putting risk on.”
Texas Capital Bancshares, Inc. (NASDAQ:TCBI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held Texas Capital Bancshares, Inc. (NASDAQ:TCBI) at the end of first quarter 2023 which was 22 in the previous quarter.
We discussed Texas Capital Bancshares, Inc. (NASDAQ:TCBI) in another article and shared Bernzott Capital Advisors’ views on the company. In addition, please check out our hedge fund investor letters Q1 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.
