Merion Road Capital Management, an investment advisor, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, Merion Road Small Cap Fund returned +5.4% bringing the YTD returns to +11.2%. This compared to a +9.2% return for the Russell 2000 Index in the quarter and an +11.0% return in YTD. The long-only portfolio of Merion Road rose +5.1% during the quarter bringing the YTD returns to +20.5%. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Merion Road Capital Management highlighted stocks like United Bancorporation of Alabama, Inc. (OTC:UBAB) in the third quarter 2024 investor letter. United Bancorporation of Alabama, Inc. (OTC:UBAB) is a bank holding company for United Bank that provides banking services. The one-month return of United Bancorporation of Alabama, Inc. (OTC:UBAB) was 6.04%, and its shares gained 45.41% of their value over the last 52 weeks. On November 8, 2024, United Bancorporation of Alabama, Inc. (OTC:UBAB) stock closed at $56.20 per share with a market capitalization of $199.607 million.
Merion Road Capital Management stated the following regarding United Bancorporation of Alabama, Inc. (OTC:UBAB) in its Q3 2024 investor letter:
“United Bancorporation of Alabama, Inc. (OTC:UBAB) appreciated modestly despite mixed Q2 results. During the quarter the Treasury announced proposed disposition guidelines for institutions that received ECIP capital. As a reminder, UBAB received $124mm in perpetual preferred equity through the ECIP program that costs no more than 2.0% p.a. and have little to no voting rights. Within the proposed disposition guidelines is a framework for ECIP participates to buyback the security at a price equal to the present value of future interest payments. Based on prevailing rates, the Treasury estimated that this would result in a purchase price between 7% and 28% of the principal amount. This is obviously great news, but is not new.
An alternative disposition venue would be for a “mission-aligned nonprofit affiliate” to buy the ECIP capital. UBAB already has a subsidiary nonprofit established, not that it matters as there is no mention of how long the nonprofit must have been operating. Should the nonprofit purchase the ECIP preferred equity, the Treasury states that the price will be set at just 0.5% of the principal amount. Functionally this means that UBAB could repurchase $124mm of preferred equity for $0.6mm (and not say $25mm). These are still just proposed guidelines, and any repurchase cannot occur for another several years; nonetheless, this could further bolster the longer-term return of our investment.”
A customer walking into a bank branch, expressing the convenience of consumer banking services.
United Bancorporation of Alabama, Inc. (OTC:UBAB) is not on our list of 31 Most Popular Stocks Among Hedge Funds. While we acknowledge the potential of United Bancorporation of Alabama, Inc. (OTC:UBAB) 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 addition, please check out our hedge fund investor letters Q3 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.