The Canyon Value Realization Fund was up 1.94% in February, bringing it to a 1.23% gain YTD (both figures net of fees), mostly thanks to long equity positions. CVRF’s equity positions returned 7.4% and contributed 135 basis points gross to the fund’s performance for the month, while the fund’s debt portfolio contributed 90 bps broken down as 30 bps from corporate bonds, 30 bps from residential mortgage backed securities, 25 bps from corporate loans and the remaining 5 from convertibles.
Canyon Value Realization Fund benefits from Comcast, Time Warner rebound
The CVRF letter mentions that some of the best performing stocks for the month were “two cable companies in the midst of a merger that had traded off in January due to concerns about FCC regulation,” which obviously refers to Comcast and Time Warner.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
“We added exposure at these lower levels to the acquiree (and trimmed some after the appreciation in February), though we continue to believe that the impacts of this new regulatory regime are being overestimated,” the fund wrote in a letter to investors reviewed by ValueWalk.
At the end of January, changes to the way that broadband is defined made investors less confident that the FCC would ultimately approve the Comcast-TWC merger, causing a short-lived sell-off at the end of the month. Comcast had fully recovered by February 6 and then continued rising from there (currently trading at $58.79). Time Warner (the acquiree in Canyon Value Realization Fund’s letter) had been falling since the beginning of the year anyways, but it also bounced back from its month-long slump (now trading at $84.51).
Is CVRF holding Toronto-Dominion?
The Canyon Value Realization Fund also mentions a ‘restructured financial company’ that had a good month thanks to a positive call with the new CEO, who has been delivering on operational goals and reducing costs. It’s not as obvious which financial company this might be, but we also know that a restructured financial company was one of CVRF’s biggest detractors in January. That’s starting to sound like Toronto-Dominion, which ended January down nearly 10% for the month and then rebounded in February – including a well-received conference call from CEO Bharat Masrani who took over in November last year. It’s just speculation (unlike the Comcast/Time Warner positions, that really can’t be anything else), but it matches what information we have.
The other major contributor was a consumer lender that reported strong earnings in February, and the letter said that Canyon Value Realization Fund didn’t have any material detractors from its equity positions last month.