Alluvial Capital Management recently released its Q3 2020 Investor Letter, a copy of which you can download here. In the letter, among other things, the fund reported a return for its Alluvial Fund LP Net of 15.1% for Q3 2020. You should check out Alluvial Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the said letter, Alluvial Capital highlighted a few stocks and P10 Holdings Inc. (NYSE:PIOE) is one of them. P10 Holdings Inc. (NYSE:PIOE) is an alternative asset management investment firm. Year-to-date, P10 Holdings Inc. (NYSE:PIOE) stock gained 208.3% and on October 22nd it had a closing price of $4.04. Here is what Alluvial Capital said:
“P10 Holdings is by far the largest contributor to our portfolio’s gains this year. I have written about P10 before, so I won’t go into great detail here on the company’s strategy or operations. Suffice to say, the company continues to execute, adding another asset manager to its stable this quarter. In August, P10 announced it would acquire TrueBridge Capital Partners, a venture capital manager. The deal closed in early October. With the addition of TrueBridge, P10 now offers a spectrum of alternative investment solutions, from traditional private equity to private credit and now, venture capital. The deal was creatively financed, preserving substantial upside for both P10 and the sellers. P10 now expects annual pre-tax, unlevered cash flow of $55 million or so. P10 will convert an extraordinary percentage of this $55 million to free cash flow because the firm has a large tax shield and requires essentially zero capital expenditures.
Shares of P10 have soared from a low of $1.25 amidst the COVID-19 panic to over $4.00 today. Despite the move, P10 shares still trade for only 12x my estimate of 2021 free cash flow. That’s incredibly reasonable for a firm of P10’s predictability and asset efficiency. Setting aside all growth from future acquisitions (and there will be more) it won’t take much for P10 to grow its free cash flow per share at an 8-10% rate or more for years to come. Growing assets under management/committed capital at just 5% annually, plus benefiting modestly from operating leverage and debt amortization would accomplish the goal. In the nearterm, P10 could experience a wave of new attention and a corresponding increase in valuation when the firm becomes an SECreporting company and up-lists to a major exchange, likely within the next year.
P10 was an ideal scenario for Alluvial Fund: a little-known company that had recently gone through a major corporate transition (bankruptcy and recapitalization) before completing a transformative acquisition. It took the market many months to discover P10’s new economics and strategy, which allowed us to build a sizable position at very attractive prices. As satisfying as our investment has been to this point, I think P10’s best days and returns are still ahead of us. Not every investment Alluvial Fund makes is one it will hold for years and years. Most companies are not worthy of that. But when I find a company like P10 that has a high chance of multiplying shareholder wealth several times over, I won’t hesitate to make it a material portion of our portfolio.”
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Our calculations showed that P10 Holdings Inc. (NYSE:PIOE) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.
