Here’s Why Jackson Peak Capital is Holding Burford Capital (BUR) for the Long-Term
Jackson Peak Capital, an investment management firm, released its fourth quarter 2023 investor letter, a copy of which can be downloaded here. As of Q4 2023, the company has completed ten months of investing activities since its March 2023 launch. Jackson Peak had a great quarter with a net return of +9.9% and a gross return of +12.0%. Following the pattern seen in Q3, broad equities markets fell in October before pulling back sharply to rebound in November and December. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Jackson Peak Capital featured stocks like Burford Capital Limited (NYSE:BUR) in its Q4 2023 investor letter. Based in Saint Peter Port, Guernsey, Burford Capital Limited (NYSE:BUR) is a legal finance products and services provider. On February 27, 2024, Burford Capital Limited (NYSE:BUR) stock closed at $15.61 per share. One-month return of Burford Capital Limited (NYSE:BUR) was 3.79%, and its shares gained 91.77% of their value over the last 52 weeks. Burford Capital Limited (NYSE:BUR) has a market capitalization of $3.418 billion.
Jackson Peak Capital stated the following regarding Burford Capital Limited (NYSE:BUR) in its fourth quarter 2023 investor letter:
"A core belief of our portfolio-level and security-level investment decisions is that we are looking for opportunities where there are multiple ways to win. As such, the AI value chain beneficiaries are just one part of the fundamental longs in the portfolio, and we have several other “bets” that diversify the portfolio that could not be more different in sector and factor exposure. One example is Burford Capital, a ~$3.2 billion market cap litigation finance company. We were long Burford Capital Limited (NYSE:BUR) for much of 2023, and we increased the size of the position in Q4.
Burford is the world’s largest litigation finance firm and has a history of realizing 30% IRRs on its investments. Burford’s core business funds the expenses related to a claim in exchange for a share of the ultimate damages. We see multiple ways for this investment to work. First, Burford won a ~$6.2 billion (and counting given interest accrual; ~2x its current market cap) claim of damages against the Republic of Argentina following a ruling by the Southern District of New York in September in connection with a favorable ruling in the YPF/ Petersen and Eton Park cases. The market is applying a considerable discount (we’d argue giving zero credit) to this judgement due to Argentina’s financial situation, but we believe the probability of a deal being struck between Argentina and Burford is high. We believe Argentina will come to the negotiating table for two primary reasons: 1) newly elected President Milei is a game-changer for this situation since he’s made public comments supporting payment, a 180 degree shift from historical administrations in Argentina; 2) Argentina is reliant on the IMF and global bond investors for financing to run the country, and bond investors will require clarity on how the Burford claims will be resolved ahead of a likely restructuring of Argentina sovereign debt – this presents a natural catalyst and leverage for Burford to bring Argentina to the negotiating table within the next 12 months as the sovereign debt maturity wall approaches. Beyond this case, we believe Burford’s broad portfolio of cases is underappreciated today, and they will continue to put points on the board as they work through the litigation backlog that moved slowly through the courts during COVID, temporarily depressing the value of its portfolio and earnings power. Additionally, the company has other potential windfall cases in the pipeline including the case it is handling for the food giant Sysco against its suppliers for price-fixing. Ultimately, we view Burford’s valuation today as attractive even if you exclude the Argentina/YPF claim, creating an asymmetric return profile given our assessment of the Argentina situation."
An accountant meticulously going over documents in her office, exemplifying the company's commitment to accuracy and detail.
Burford Capital Limited (NYSE:BUR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Burford Capital Limited (NYSE:BUR) was held by 30 hedge fund portfolios, up from 23 in the previous quarter, according to our database.
We discussed Burford Capital Limited (NYSE:BUR) in another article and shared Greenhaven Road Capital's views on the company. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
Disclosure: None. This article is originally published at Insider Monkey.
