MW This fund returned 21% in May alone buying 'left-for-dead' stocks - and it has a new target

By Jules Rimmer

Whetstone Capital has had a big year, propelled by companies including the fintech Dave

One hedge fund banked on scouring the dark and dislocated corners of the market to deliver an eye-popping 21% jump in May alone.

Whetstone Capital, headquartered in Shawnee Mission, Kan., was established by 2010 by David Atterbury and a year later his investment partner, Andrew Carlson joined him.

May's gains for the Whetstone Capital LP were the strongest since the fund's inception, and took year-to-date gains to 35% through the end of June.

"It was one of those periods where it wasn't just longs rallying, but shorts going down," said Carlson in an interview with MarketWatch. He didn't identify the companies that were shorted.

The major winners highlighted by the portfolio managers for contribution to the bottom line were fintech Dave $(DAVE)$ , cybersecurity company Cloudflare $(NET.UK)$ , digital health messaging provider OptimizeRx $(OPRX)$ , and project management software company Monday.com $(MNDY)$, some of whom once fulfilled the 'left-for-dead' criteria.

The team had made a brave bet to increase exposure in April that seemed premature at first, but was repaid in spades as markets recovered.

While software remains the fund's core sectoral focus and Atterbury feels "confident maintaining an outsized allocation to it," the duo is interested in expanding their portfolio into other areas. They have replaced some of that exposure with new ideas in financials, healthcare, advertising technology and financial data technology.

Management acknowledges that despite impressive inception-to date returns of 451%, those returns have historically been more volatile than they would have liked. The belief is that the gradual diversification of industry specialization may help smooth out those returns out in future

Many of the seeds for May's spectacular showing were sown in the spring and summer of 2022 when the S&P 500 SPX dropped 20% as inflation ran wild. The management team led by Atterbury and Carlson identified lots of valuations left mispriced by the speed and scale of the indiscriminate sell-off.

The boom of the previous two years had seen many companies go public prematurely, not yet properly prepared for markets or the scrutiny that comes with listing. Some of these stocks had limited coverage, a fickle shareholder base and limited liquidity, exacerbating many share prices tumbles, they said.

Whetstone's size, at just under $250 million of assets under management, enabled it to be nimble and exploit opportunities that presented themselves. Where Whetstone felt it had an advantage was a preparedness to look at these stocks that Atterbury called "left for dead" and "orphaned by market turbulence".

Rather than focusing exclusively on valuation metrics, Whetstone placed their bets where they felt management credibility was strongest.

While Whetstone has a relatively concentrated portfolio with the top ten positions accounting for three-quarters of exposure, Atterbury likes to keep 15-20% in what he refers to as the "dislocated" bucket where, for one reason or another, the market has disowned or neglected a stock and he detects value.

Whetstone pointed out that they make 200-300 management calls every year, research directly, maintain "valuation discipline" and the average holding period of their long positions is approaching three years. The short book, however, turns over much faster because in this sector, given liquidity considerations, adverse newsflow is discounted very quickly and the shareholder base isn't broad enough to absorb bad news.

Whetstone highlighted one stock in their portfolio, accounting for 10% of it at present, for which they have especially high hopes: London-listed interdealer broker, TP ICAP (UK:TCAP) . They foresee a significant catalyst for crystallizing value as and when the company spins off its data segment Parameta Solutions to public markets. If it were to trade at similar multiples to peers it could reach an enterprise value equivalent to 80% of TCAP's current market capitalization.

Whetstone note that TP ICAP announced in May it was evaluating the appropriate timing for a minority listing of Parameta Solutions, having previously targeted a listing as soon as the second quarter.

-Jules Rimmer

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July 01, 2025 01:33 ET (05:33 GMT)

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