Is Burford Capital Limited (BUR) a “Litigation Finance Company”?
Vltava Fund, an investment management company, recently released its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. 2023 proved to be a prosperous year for the fund. The letter concentrates on outlining the more noteworthy changes that have occurred within the businesses that the fund owns. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
In its Q4 2023 investor letter, Vltava Fund featured stocks such as Burford Capital Limited (NYSE:BUR). Based in Saint Peter Port, Guernsey, Burford Capital Limited (NYSE:BUR) is a legal finance products and services provider. On January 4, 2024, Burford Capital Limited (NYSE:BUR) stock closed at $14.86 per share. One-month return of Burford Capital Limited (NYSE:BUR) was 10.90%, and its shares gained 70.80% of their value over the last 52 weeks. Burford Capital Limited (NYSE:BUR) has a market capitalization of $3.254 billion.
In its fourth quarter 2023 investor letter, Vltava Fund stated the following regarding Burford Capital Limited (NYSE:BUR):
"Burford Capital Limited (NYSE:BUR) is one of the most interesting and difficult to replicate businesses we have come across in recent years. Burford is a “litigation finance company”, meaning that it finances its clients (primarily large corporations and law firms) through litigation in exchange for a share of the awarded damages. It is essentially an investment company whose portfolio consists of individual litigation cases. The long-term historical returns are very high (Burford on average earns close to 100% return on funded litigation) and Burford can repeatedly reinvest the funds from profits without the average return declining. Such companies are very rare. In Burford's broad portfolio of about $7 billion in total, a case involving the expropriation of YPF shareholders by the Argentine government stands out in size. This litigation made significant progress last year and the court has even already determined the damages to be paid by Argentina. Initial estimates were in the range of $6–16 billion. In valuing Burford’s shares, we had been working with an amount at the low end of that range and so we were pleasantly surprised when the court set the damages at the high end. Of the established $16 billion (and this amount grows by an additional $2.3 million per day due to penalty interest), about $6.2 billion should go directly to Burford. That is a relatively large sum of money compared to Burford's market capitalization, which, despite an 83% rise in its stock price last year, is about $3.4 billion and includes all of the company’s other extensive businesses. We do not expect that Burford will receive the full $6 billion. We anticipate a settlement agreement with Argentina and a lower figure. On the other hand, we think there are other cases in Burford’s portfolio that have potential to generate billions of dollars in damages and, moreover, where the counterparties are of a different calibre in terms of creditworthiness and enforceability than is Argentina. Burford is a company that is trickier to analyse, requires more abstract thinking, and also has an irregular and difficult to predict cadence of financial results. But that does not bother us in the least. Quite the contrary."
A close-up of a person signing a loan agreement, emphasising safety and legality of this company's fixed & floating rate loan services.
Burford Capital Limited (NYSE:BUR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 23 hedge fund portfolios held Burford Capital Limited (NYSE:BUR) at the end of third quarter which was 22 in the previous quarter.
We discussed Burford Capital Limited (NYSE:BUR) in another article and shared Alphyn Capital Management’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
