Alluvial Capital Management, LLC is a registered investment advisory firm, that was founded in 2014 by a Chartered Financial Analyst, David Waters. Recently Alluvial Capital Management has released its Q1 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 -17.7% for Q1 2020. Meanwhile, the benchmark Russell 2000 TR and the S&P 500 TR lost 30.60% and 19.60%, respectively.
In the said letter, Alluvial Capital highlighted a few stocks and MMA Capital Holdings Inc. (NASDAQ:MMAC) is one of them. MMA Capital Holdings engages in investing in debt associated with renewable energy infrastructure and real estate. Year-to-date, MMAC stock lost 13.4% and on April 29th it had a closing price of $28.00. Its market cap is of $157.1 million. Here is what Alluvial Capital said:
“MMA Capital Holdings is one of Alluvial’s longest-held companies, and presently one of the most frustrating. Despite intelligent, aligned management, continued excellent operating results, and a simplified balance sheet, shares continue to trade at enormous discounts to book value, with or without the company’s substantial tax assets. Excluding these tax assets, shares now trade at discount to book value of around 40%. Including tax assets, shares trade at less than half of book value. Discounts to book value are often justified for firms that are not expected to earn their cost of capital through the full economic cycle. But MMA Capital Holdings is well on its way to achieving a consistent double-digit return on equity (tax assets excluded.) The only logical explanation for the shares’ doldrums is concern over the combined effects of recession and freefalling oil prices on the company’s solar development loan book. There will be an effect. The most pristine of loan books in any industry will feel some stress this year. But the move toward solar will continue. The economic case for renewables is not driven by short-term fossil fuels prices. There is no reason to believe MMA Capital Holdings will experience a worrying degree of impairment of its loan book resulting in a meaningfully decreased book value. If this degree of weakness in its trading price persists, I expect MMA to resume its share repurchase program. The financial logic is too compelling not to do so. I consider MMA Capital Holdings one of the best-managed companies I know, and I have no doubt its shares will be several times the current price by the end of the decade. While shares have been flat over the last three years, book value per share (excluding tax assets) has grown 85% over the same period. This dynamic cannot hold forever.”
Disclosure: None. This article is originally published at Insider Monkey.
