Alluvial Capital Management, an investment advisory firm, released its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund had a good second quarter rising 3.9% and its year-to-date return was 10.4%. However, comparable indexes sputtered. The Russell Micro-Cap Index dropped 5.3%, entering negative territory for 2024 while, The Russell 2000 Index dropped 3.3%, resulting in a 1.7% year-to-date return. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Alluvial Capital Management highlighted stocks like Net Lease Office Properties (NYSE:NLOP) in the second quarter 2024 investor letter. Net Lease Office Properties (NYSE:NLOP) is a publicly traded real estate investment trust. The one-month return of Net Lease Office Properties (NYSE:NLOP) was 2.85%, and YTD, its shares gained 60.01% of their value. On August 22, 2024, Net Lease Office Properties (NYSE:NLOP) stock closed at $29.57 per share with a market capitalization of $437.192 million.
Alluvial Capital Management stated the following regarding Net Lease Office Properties (NYSE:NLOP) in its Q2 2024 investor letter:
“Our portfolio is largely unchanged from last quarter with Net Lease Office Properties (NYSE:NLOP) still at the top. “NLOP” has been very active, selling five properties and surrendering two more to lenders in May and June. NLOP used its sales proceeds to reduce its term loan by $138 million and its mezzanine debt by $22 million. Since going public by spin-off last November, Net Lease Office Properties has reduced its term loan and mezzanine debt by 47% to $243 million, leaving it modestly levered and highly cash-generating as it continues to wind down
Excluding a few properties likely to be surrendered to lenders, Net Lease Office Properties now produces annualized base rents of $105 million. The market is valuing NLOP at $587 million for a cap rate (net property operating income/enterprise value) of 17.9% and $90 per square foot. It’s just plain dirt cheap, and the continuing liquidation of the Net Lease Office Properties portfolio will cause this discount to close sooner rather than later. At a still conservative 12% cap rate or $135 per square foot, NLOP would be worth $46 per share.”
Interior of a large office building – reflecting the company’s various commercial properties.
Net Lease Office Properties (NYSE:NLOP) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held Net Lease Office Properties (NYSE:NLOP) at the end of the second quarter which was 19 in the previous quarter. While we acknowledge the potential of Net Lease Office Properties (NYSE:NLOP) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Net Lease Office Properties (NYSE:NLOP) and shared Kingdom Capital Advisors’ views on the company. In the Q1 2024 investor letter, Alluvial Capital Management expressed its conviction in the upside potential of Net Lease Office Properties (NYSE:NLOP). In addition, please check out our hedge fund investor letters Q2 2024 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.