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Alluvial Capital Management, LLC, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A return of 28.4% was recorded by the fund for the year end 2020, outperforming the Russell MicroCap TR that returned 21%, its Russell 2000 benchmark that delivered a 20%. return, and its MSCI World Sm+MicroCap NR index with 16%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Alluvial Capital Management, in their Q4 2020 Investor Letter said that they continue to be invested in Nuvera Communications, Inc. (NYSE: NUVR) because for them, the quality and profitability of the company will continue to increase and its financial leverage will continue to decline. Nuvera Communications, Inc. is a communication solutions provider that currently has a $103.2 million market cap. For the past 3 months, NUVR delivered a 16.02% return and settled at $19.85 per share at the closing of February 2nd.
Here is what Alluvial Capital Management has to say about Nuvera Communications, Inc. in their investor letter:
"Nuvera Communications gets lonelier and lonelier. In recent years, small rural telecoms have left public ownership one after another. Horizon Telcom and North State are now private. Otelco and Alaska Communications have agreed to be acquired. Once those depart, Nuvera will be the smallest remaining independent rural telecom (excluding Alaska Power and Telephone, which is half electric utility.) Nuvera shares ended the year just slightly ahead of where they began, but the business advanced by leaps and bounds. Nuvera spent the year reducing its already low debt and investing millions to expand and improve its fiber-optic network. Revenue and unlevered pre-tax cash flow (EBITDA) held more or less steady, but the firm’s revenue composition continued to shift favorably away from legacy landlines to broadband, video, and subsidy income. As recently as 2015, traditional telecom service still accounted for >40% of Nuvera’s revenue. In the most recent quarter, legacy revenues declined to below 20% of total revenues for the first time. As legacy revenues continue to run off slowly and the need for broadband service continues to grow, I expect Nuvera to return to modest top-line growth and increasing earnings.
The quality and profitability of Nuvera’s operations will continue to increase and its financial leverage will continue to decline. I suspect private equity firms will give the company a close look this year, if they are not already doing so. Private equity scooped up other Minnesota telco assets in 2020, including providers in close proximity to Nuvera’s operations. Nuvera would be a perfect target for an acquirer, especially considering the millions in public company expenses an acquirer could eliminate immediately."
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NUVR delivered a 32.97% return in the past 12 months. However, our calculations show that Nuvera Communications, Inc. (NYSE: NUVR) does not belong in our list of the 30 most popular stocks among hedge funds.
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Video: Top 5 Stocks Among Hedge Funds
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