Alphyn Capital Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of -3.6% was recorded by the fund for the third quarter of 2021, and 9.6% return year-to-date, while its S&P 500 TR benchmark delivered a 15.9% return YTD. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Alphyn Capital Management, in its Q3 2021 investor letter, mentioned Crossroads Systems, Inc. (NYSE: CRSS) and discussed its stance on the firm. Crossroads Systems, Inc. is a Dallas, Texas-based holding company with a $119.4 million market capitalization. CRSS delivered a 105.13% return since the beginning of the year, while its 12-month returns are up by 118.58%. The stock closed at $18.61 per share on October 25, 2021.
Here is what Alphyn Capital Management has to say about Crossroads Systems, Inc. in its Q3 2021 investor letter:
“I discussed Crossroads at length in my last letter. Within days of the end of the second quarter, management disclosed that following its large PPP loan origination windfall, Crossroads would not get regulatory approval for its purchase of Rice Bancshares. Now overcapitalized, the company returned cash to shareholders through a $40/share special dividend (approximately 2/3s of the entire company’s value). Crossroads became a negligibly small part of our portfolios following the dividend distribution. I, therefore, added to the position, as I like investing with effective management teams who have demonstrated integrity and good capital allocation.
Crossroads Chair and owner Robert Alpert also runs a listed private equity firm, P10 Holdings. On September 14th, both companies announced a partnership to originate $250m of loans to women and minority-owned businesses and loans to renewable energy and community redevelopment projects over the next 18-24 months. The partnership will use Crossroads’ CDFI designation and P10’s credit investing skillset, providing yield to Crossroads and fees to P10. On September 28th, Crossroads further announced the acquisition of an asset-based lending firm with a “scalable platform.” 11 It would seem that management, undeterred by the Rice disappointment, continues to pursue its goal to expand Crossroads from a single-family mortgage lending institution in Texas to a nationally recognized small business lender. I look forward to seeing how they grow the business in the future.”
Based on our calculations, Crossroads Systems, Inc. (NYSE: CRSS) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Crossroads Systems, Inc. (NYSE: CRSS) delivered a -13.04% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
