Fort Worth-based long/short hedge fund Alta Fox Capital, LLC released its quarterly letter – a copy of which can be downloaded below. The fund focuses on high-quality businesses of all sizes at the lowest possible rates. The firm believes in the potential of undiscovered gems to produce great results. After having more than a decade of investing experience, Connor Haley founded the company in 2018. Before starting Alta Fox Capital, he held various roles in big companies like Goldman Sachs and Scopia Capital Management LP. As of the writing of this article, this Harvard alumnus is the #1 investor on MicroCapClub.com.
In its recent quarterly letter, Alta Fox Capital, LLC announced a 10.23% net return (12.39% gross), which compared favorably with major indices. The fund’s average net exposure for Q2 2019 is at 80.36% and its year-to-date (YTD) return is at 41.20% (52.17% gross).
In Q2 2019, the fund increased 12.39% gross and 10.23% net. This compared favorably versus all major indices. The average net exposure during the quarter was 80.36%. Year to date, the fund has returned 52.17% gross and 41.20% net compared to 18.54% for the S&P 500, 16.98% for the Russell 2000, and 14.15% for the Russell Microcap index. Since inception in April 2018, the fund has returned 66.06% gross and 50.61% net compared to 14.21% for the S&P 500, 4.19% for the Russell 2000, and -1.45% for the Russell Microcap Index. See the appendix for further details.
The fund managed to outperform all major indices during both a bearish environment last year and thus far in a bullish overall environment in 2019. Notably, small and micro-cap equities have materially underperformed the S&P 500 since the fund’s inception. Given small and micro-cap stocks comprise a significant percentage of our holdings, I am pleased we have been able to outperform the S&P 500 even with our strategy out of favor. Most importantly, we have accomplished these results with strict risk controls, no gross leverage, and a disciplined research process.
While I am pleased with the fund’s early results, I strive to ignore short-term fluctuations and instead focus on the intrinsic value growth in our portfolio holdings, which over the long-run should converge with portfolio performance. I encourage limited partners to do the same (both in times of outperformance and underperformance). I firmly believe that in the long-run, our strategy of buying high-quality and underfollowed businesses at cheap prices will deliver attractive absolute and relative returns.
Selected Portfolio Results
3Pea International Inc. (TPNL)— as of 4/29/19, the new name is Paysign, Inc with ticker “PAYS”
I originally profiled TPNL/PAYS at ~$2.50/share and have discussed it in every quarterly letter to date. It recently hit as high as $18.00/share before a shelf offering and sell-side downgrade led to a sell-off to the mid-teens. I significantly trimmed our position in the quarter on stock strength and it is now only a small position in the fund. I continue to appreciate the strength of the business model and would look for any share price weakness as a potential buying opportunity.”
You can download a copy of Alta Fox Capital LLC’s Q2 2019 Investor Letter here:
You can also see the list of our 2019 Q2 investor letters and download them on this page.