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Alluvial Capital: “P10 (PX)’s Future is as Bright as Ever”

·4 min read

Alluvial Capital Management, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, Alluvial Fund fell 7.3%, slightly better than relevant benchmarks. Coming off an excellent year, the market’s mood has taken a turn for the dour. The wind has come out of tech stocks, US consumers are feeling the pinch of inflation despite excellent employment trends, interest rates are on the rise, and Europe has been rocked by Putin’s brutal and indefensible invasion of Ukraine. The bad news is not hard to find. However, investor pessimism is what winds up creating opportunities. Alluvial Fund is full of just such opportunities, and they spend every day looking for more. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Alluvial Capital Management mentioned P10 Inc. (NYSE:PX) and explained its insights for the company. Founded in 1992, P10 Inc. (NYSE:PX) is a Dallas, Texas-based capital market company with a $1.4 billion market capitalization. P10 Inc. (NYSE:PX) delivered a -12.09% return since the beginning of the year, while its 12-month returns are up by 22.03%. The stock closed at $12.21 per share on April 26, 2022.

Here is what Alluvial Capital Management has to say about P10 Inc. (NYSE:PX) in its Q1 2022 investor letter:

"Alluvial Fund’s largest holding, P10 Inc., was a drag on performance this quarter. P10 fell 13% in the first quarter and is down 16% this year as I write. I have laid out the case for P10 multiple times over the years we have owned it, so I won’t bore you once again with the intricacies. Suffice to say nothing has changed. P10 continues to possess supremely stable and predictable cash flows that will grow organically with zero associated capital expenditures. The company will use these cash flows to acquire additional alternative assets management cash flow streams. Management owns huge quantities of stock and is highly motivated to build the value of P10’s franchise.

P10 ended the year with $17.3 billion in fee-paying assets under management and guided toward an additional $5 billion by year-end 2023, excluding any acquisitions the company may perform. Existing assets under management, assuming a 58% cash margin and the company’s current debt structure, will produce $95 million in annual cash flow or almost 80 cents per share. $5 billion in incremental AUM could push that figure to $1.05 per share or more. I view 20x 2023 free cash flow, or $21, as a very modest short-term target for P10 stock.

Clearly, I think P10’s future is as bright as ever. This drawdown doesn’t concern me in the slightest. It has not been a fun experience, but it’s also not the first time it has happened. In fact, P10 shares dipped more than 20% three times between January 2019 and the company’s IPO and uplisting in late 2021.

Those declines were no sunny day at the park either, but we held on and enjoyed the rewards on the other side. Occasional declines, even steep ones, are an unpleasant but unavoidable fact of life that must be tolerated to enjoy the long-term compounding of high-quality companies. Imagine selling P10 in September 2019 when the stock fell from $1.40 to $1.06, only to watch it rise to $4 a year later. I did not make that mistake then, and I won’t make it now."

Roman Samborskyi/Shutterstock.com

Our calculations show that P10 Inc. (NYSE:PX) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. P10 Inc. (NYSE:PX) was in 18 hedge fund portfolios at the end of the fourth quarter of 2021. P10 Inc. (NYSE:PX) delivered a 5.31% return in the past 3 months.

In March 2022, we also shared another hedge fund’s views on P10 Inc. (NYSE:PX) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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