Here’s Why Cedar Creek Partners Exited BM Technologies (BMTX)
Investment management company Cedar Creek Partners recently released its first-quarter 2023 investor letter. A copy of the same can be downloaded here. The market recovered in the first quarter, with the NASDAQ rising 17% compared to a 33% decline in the last quarter. At the same time Cedar Creek increased by 6.4% in the first quarter, net of fees and expenses. The firm focused on investing in microcap stocks, and over-the-counter stocks in particular. You can check the top 5 holdings of the fund to know its best picks in 2023.
Cedar Creek Partners highlighted stocks like BM Technologies, Inc. (AMEX:BMTX) in the first quarter 2023 investor letter. Headquartered in Wayne, Pennsylvania, BM Technologies, Inc. (AMEX:BMTX) is a financial technology company. On July 3, 2023, BM Technologies, Inc. (AMEX:BMTX) stock closed at $2.9300 per share. One-month return of BM Technologies, Inc. (AMEX:BMTX) was -10.40%, and its shares lost 50.25% of their value over the last 52 weeks. BM Technologies, Inc. (AMEX:BMTX) has a market capitalization of $34.758 million.
Cedar Creek Partners made the following comment about BM Technologies, Inc. (AMEX:BMTX) in its first quarter 2023 investor letter:
"During the quarter we finished exiting our position in BM Technologies, Inc. (AMEX:BMTX). The poorly named company was a poor investment. Maybe the first part of the name should have told us it was going to be a turd. Anyways. It is always important to look at what mistake was made in a poor performing investment. In this case, and it is embarrassing, we failed to truly understand the industry and the company’s position. We know there are industries we don’t understand as well as business models. When we encounter them, we have to either invest the time to understand the industry and the specific business or move on.
BMTX presented itself as a fintech company on the cusp of a new wave in banking focused on college students and white-label banking products for companies, such as T-Mobile (and possible Google until that was canceled). The reality is that they are a middle man trying to earn a spread on funds disbursed to college students and white label banking products. Our zero-interest rate environment hid this. College students have small balances and T-Mobile banking customers are interest rate sensitive so as rates rose, the spread BMTX could earn shrunk. T Mobile money currently pays 2.5% on balances. BMTX was getting 3% from Customers Bancorp, but it was not a market rate. They now get a floating rate closer to 4%. But what once was a 3% interest spread when interest rates were zero, collapsed as rates increased, and is now roughly half of that. Their profitability vanished quickly. Thankfully it was a modest size position at roughly 3% of the fund and our overall loss was probably less than 1% of assets."
BM Technologies, Inc. (AMEX:BMTX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 2 hedge fund portfolios held BM Technologies, Inc. (AMEX:BMTX) at the end of first quarter 2023 which was 2 in the previous quarter. In addition, please check out our hedge fund investor letters Q1 2023 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.
