Is Crossroads Impact (CRSS) a Worthy Investment Choice?

Alphyn Capital Management, an investment management firm, published its  second-quarter 2022 investor letter – a copy of which can be downloaded here. The fund’s Master Account returned -14.7% net in Q2 2022 vs -16.1% for the S&P500. As of June 30, 2022, the top ten positions comprised approximately 69% of the portfolio, and the portfolio held approximately 3.50% in cash. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Alphyn Capital mentioned Crossroads Impact Corp. (NYSE:CRSS) and explained its insights for the company. Founded in 1996, Crossroads Impact Corp. (NYSE:CRSS) is a Dallas, Texas-based holding company with a $73.0 million market capitalization. Crossroads Impact Corp. (NYSE:CRSS) delivered a -12.51% return since the beginning of the year, while its 12-month returns are down by -50.55%. The stock closed at $12.24 per share on August 08, 2022.

Here is what Alphyn Capital has to say about Crossroads Impact Corp. (NYSE:CRSS) in its Q2 2022 investor letter:

“The company’s PPP operations from last year are winding down as loans are forgiven, with a $1.5bn loan balance remaining out of an initial $6.3bn. What remains is the company’s traditional mortgage lending business, and an expanding small business loans book.

Crossroads $133 million loan book has continued to perform steadily, with under 1% in delinquencies and a net interest margin of approximately 5%. The company credits its performance to its deep connections in the community, manual underwriting process with conservative debt-to-income ratios, and focus on underserved firsttime borrowers who “have shown the financial discipline to operate without debt.”

The company has been moving forward with its plans to expand its book of business from a single-family mortgage lending institution in Texas to a broader lender focused on serving minority individuals and small businesses through environmental and responsible social lending. To that end, it acquired an asset lending firm and a non-bank direct lender. It also signed a $250m agreement with Enhanced Capital, a subsidiary of P10 Holdings (a related company that shares a chair and several shareholders with Crossroads). Shortly after year-end, Crossroads announced a $180m equity injection from P10, with the option to add a further $350m, and a $150m debt facility led by Texas Capital Bank. Crossroads has deployed $70m so far in 2022 and expects its loan book to approach $500 million. It is too early to judge results, but we know that Crossroads is targeting “in excess of 20% return on equity.”

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Our calculations show that Crossroads Impact Corp. (NYSE:CRSS) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Crossroads Impact Corp. Crossroads Impact Corp. (NYSE:CRSS) delivered a -2.08% return in the past 3 months.

In November 2021, we also shared another hedge fund’s views on Crossroads Impact Corp. (NYSE:CRSS) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

Disclosure: None. This article is originally published at Insider Monkey.