Silver Ring Value Partners, an investment management company, released its first quarter 2023 investor letter. A copy of the same can be downloaded here. The fund returned -11.4% (net) in the last twelve months compared to a -8.6% return for the Russell 3000 Index and a -6.5% return for the MSCI World Index for the same period. It’s a challenging environment for the fund to find compelling investments that combine business quality and a margin of safety. You can check the top 5 holdings of the fund to know its best picks in 2023.
Silver Ring Value Partners highlighted stocks like Garrett Motion Inc. (NASDAQ:GTXAP) in the first quarter 2023 investor letter. Headquartered in Rolle, Switzerland, Garrett Motion Inc. (NASDAQ:GTXAP) is an automobile technology provider that develops and manufactures turbochargers and electric-boosting technologies. On June 7, 2023, Garrett Motion Inc. (NASDAQ:GTXAP) stock closed at $9.10 per share. One-month return of Garrett Motion Inc. (NASDAQ:GTXAP) was 1.68%, and its shares gained 13.75% of their value over the last 52 weeks.
Silver Ring Value Partners made the following comment about Garrett Motion Inc. (NASDAQ:GTXAP) in its Q1 2023 investor letter:
“Garrett Motion Inc. (NASDAQ:GTXAP): As a reminder, the convertible preferred stock that we own was a security that came about as a result of the bankruptcy process. Unlike most preferred stocks, which are issued to benefit the seller, and which are usually structurally unattractive securities, this security was structured under duress to benefit the buyers. As a result, it has the best of both worlds – strong downside protection and full upside participation with the equity.
Alas, all good things eventually come to an end. The preferred stock was never meant to be a permanent security, but rather a bridge to better days for the company, when the intent was always to convert it to common equity. With the company on the threshold of hitting the profitability metrics at which the preferred would have converted to equity, the board struck a deal with the major holders of the preferred to proceed with the conversion.
We will receive our accrued dividends, some in cash and some in the form of additional shares, and one share of common equity for each share of the preferred. I view this as a negative development for us, since the downside protection of the preferred would come in handy in case of a severe recession, which is a possibility at this point. Now owners of the convert will not have the extra protection as the economy enters a likely recession. Given the above, I intend to re-think the position sizing once the conversion occurs to make sure it’s consistent with the new risk/reward.”
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Garrett Motion Inc. (NASDAQ:GTXAP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held Garrett Motion Inc. (NASDAQ:GTXAP) at the end of first quarter 2023 which was 25 in the previous quarter. 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.
