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Palm Valley Capital Fund Holds About 74% Cash in Q3, Lags Small‑Cap Benchmarks

The value-focused fund kept roughly three-quarters of assets in cash to protect against pricey small-cap valuations.

Overview

  • Palm Valley Capital Fund returned 2.35% in the third quarter versus gains of 9.11% for the S&P SmallCap 600 and 7.99% for the Morningstar Small Cap Total Return Index.
  • The fund’s cash position was 73.5% at the start of Q3 and 74.1% at quarter‑end, reflecting a continued defensive posture.
  • Palm Valley exited Seaboard after a sharp rally pushed the shares above the firm’s valuation, locking in gains from a late‑2024 purchase.
  • The team initiated a small position in Avista after a post‑earnings pullback, citing attractive valuation and expected clarity from upcoming rate cases.
  • The fund added to LKQ on weakness, noting the shares touched a five‑year low, trade near 10x earnings, and that recent demand softness looks cyclical rather than structural.