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Is P10 Inc. (PX) A Great Long-Term Investment?

·4 min read

Alluvial Capital Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A return of 8.5% was delivered by the fund for the third quarter of 2021, as small-cap and micro-cap stock indexes struggled. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Alluvial Capital Management, in its Q3 2021 investor letter, mentioned P10, Inc. (NYSE: PX) and discussed its stance on the firm. P10, Inc. is a Dallas, Texas-based capital market company with a $1.5 billion market capitalization. PX delivered a 42.65% return since the beginning of the year, while its 12-month returns are up by 90.20%. The stock closed at $13.45 per share on November 12, 2010.

Here is what Alluvial Capital Management has to say about P10, Inc. in its Q3 2021 investor letter:

"And downs arrive in due course. For quite a while, I have been anticipating the day when our largest holding, P10 Inc., would conduct an IPO and up-list its shares to a major exchange. The day has come! Unfortunately, the company’s IPO has arrived with more of a dull thud than a splash, pricing below the indicated range.

I can think of multiple reasons why the IPO failed to live up to expectations. It was a small offering, with the company and insiders looking to raise only $300 million or so. The shares being offered have little voting power, meaning buyers will have no ability to affect the company’s governance or strategic direction. Despite P10’s success thus far, it remains a new and unproven company and a small one in the context of public companies. Whatever the reasons, this represents only a temporary set-back, not a change in narrative. I remind myself that at the IPO price of $12 (postreverse split) P10 shares have returned to where they traded just six weeks ago, before rumors of an IPO began to circulate. And compared to then, P10 is now better capitalized, more profitable, and an SEC-reporting NYSE company..." (Click here to see the full text)

Covalis Capital's Returns, AUM and Holdings
Covalis Capital's Returns, AUM and Holdings

Rawpixel.com/Shutterstock.com

Based on our calculations, P10, Inc. (NYSE: PX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. P10, Inc. delivered a 21.48% 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

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