Prosper Stars & Stripes, a long/short equity fund, recently released its first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund underperformed and generated a net return of -9.7% compared to a total return of -9.5% for the long-only small cap Russell 2000 Index (the “Russell”), and a total return of 0.2% for the long/short equity hedge fund peer group represented by the HFRX Equity Hedge Index (the “HFRX”). A combination of factors led the composite to underperform compared to its net exposure at the start of the year. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its first-quarter 2025 investor letter, Prosper Stars & Stripes Fund highlighted stocks such as Talen Energy Corporation (NASDAQ:TLN). Talen Energy Corporation (NASDAQ:TLN) is an independent power producer and infrastructure company. The one-month return of Talen Energy Corporation (NASDAQ:TLN) was 12.30%, and its shares gained 135.24% of their value over the last 52 weeks. On June 12, 2025, Talen Energy Corporation (NASDAQ:TLN) stock closed at $274.99 per share, with a market capitalization of $12.515 billion.
Prosper Stars & Stripes Fund stated the following regarding Talen Energy Corporation (NASDAQ:TLN) in its Q1 2025 investor letter:
“Talen Energy Corporation (NASDAQ:TLN) was the top contributor in the long book during the first quarter of 2025. Talen is an independent power producer (“IPP”) with 10.7 gigawatts (“GW”) of power producing assets in the 13 state mid-Atlantic region of the U.S. called the Pennsylvania-New Jersey-Maryland (“PJM”) market. As mentioned in previous letters, the company’s crown jewel asset is the 2.2 GW Susquehanna nuclear power plant. Talen signed a long-term power purchase agreement (“PPA”) with Amazon Web Services (“AWS”) for a total of 960 megawatts (“MW”). The first phase for up to 300 MW of power is in place; however, the additional phases are under review by the Federal Energy Regulatory Commission (“FERC”). Given the demand for clean energy and artificial intelligence (“AI”) datacenters, we believe a positive resolution is likely, as the dispute centers on interconnect costs and grid reliability. There are only 3.6 GW of new gas-fired generation projects expected to come online by 2030 in the PJM market. Based on management’s demand forecasts, this is not enough capacity to meet the expected needs of the market. Talen reached an agreement to extend the lives of its reliability-must-run (“RMR”) assets Brandon Shores and H.A. Wagner to the end of the decade rather than ceasing operations in May 2025. These assets will receive fixed payments totaling $180 million annually for the life of the contract. RMR assets are designed to ensure there are fewer or no blackouts when the grid is stressed. We believe the scarcity value of Talen’s assets, financial stewardship of its balance sheet and cash flows, and equity valuation support our price target of approximately $300 per share.”
A view of the skyline from an electricity pylon, to show the ubiquity of the companies energy products.
Talen Energy Corporation (NASDAQ:TLN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 80 hedge fund portfolios held Talen Energy Corporation (NASDAQ:TLN) at the end of the first quarter, which was 77 in the previous quarter. While we acknowledge the potential of Talen Energy Corporation (NASDAQ:TLN) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.
In another article, we covered Talen Energy Corporation (NASDAQ:TLN) and shared the list of best large cap energy stocks to buy according to hedge funds. Talen Energy Corporation (NASDAQ:TLN) was a top contributor to River Road Mid Cap Value Fund’s performance in Q1 2025. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of TLN as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
