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Has anyone looked at Palm Valley PCVMX?

It is run by Eric Cinnamond , who first made his name at ICMAX Intrepid Small Cap and then, I believe, at ARIVX (which was liquidated b/c he didn't see any good values). Web site is at


  • He doesn't even have the guts to mention the disaster that was ARIVX in this little blurb on their new site! That fund was bad because of very poor decisions made by the manager, Eric Cinnamond. My memory is that the only value he seemed to find was PM miners who were in a nosedive and a complete value trap at the time. Also remember him being 20-50% cash when the market took off in 2009 until it closed in 2016. I think it was in the 99th percentile when he closed. I don't think there were many investors left to keep it open. No thanks...

    From the People tab on this link:
    Eric Cinnamond and Jayme Wiggins met in 2002 when Eric returned to his alma mater, Stetson University, for an alumni event. Jayme learned under Eric as a small cap analyst for the next several years in Jacksonville Beach, Florida, where Eric had managed small cap portfolios since arriving from Evergreen Funds in 1998. Eric implemented an absolute return process while managing the Intrepid Small Cap Composite from 1998-2010 and the Intrepid Small Cap Fund from 2005-2010. Jayme managed high yield bond portfolios, including the Intrepid Income Fund, from 2005-2008, when he departed to earn his MBA at Columbia Business School.

    In 2010, Eric started a new small cap fund. The bull market beginning in 2009 elevated small cap valuations to never-before-seen levels. Eric returned capital to investors in 2016 because he did not believe there were compelling investment opportunities. Jayme took over the Intrepid Small Cap Fund upon Eric’s departure in 2010. He managed the fund using the same absolute return investment strategy until September 2018, when his firm decided to pivot to a more fully-invested posture.
  • Hi, NumbersGal.

    You might look at the Launch Alert for Palm Valley Capital in our July issue.

    MikeM's recollection of ARIVX in 2009 is incorrect. Here's a snippet on his asset allocation from our profile of the fund.
    He’s at 85% cash currently (late April 2016), but that does not mean he’s some sort of ultra-cautious perma-bear. He has moved decisively to pursue bargains when they arise. "I'm willing to be aggressive in undervalued markets," he says. For example, his fund went from 0% energy and 20% cash in 2008 to 20% energy and no cash at the market trough in March, 2009. Similarly, his small cap composite moved from 40% cash to 5% in the same period. That quick move let the fund follow an excellent 2008 (when defense was the key) with an excellent 2009 (where he was paid for taking risks). The fund's 40% return in 2009 beat his index by 20 percentage points for a second consecutive year. As the market began frothy in 2010 ("names you just can't value are leading the market," he noted), he began to let cash build. While he found a few pockets of value in 2015 (he surprised himself by buying gold miners, something he’d never done), prices rose so quickly that he needed to sell.
    There are two things that are true about Mr. Cinnamond: (1) he's a spectacular stock picker and (2) he's incredibly picky. When you adjust his fund's performance for cash level, you find his stock picks - on whole - beating the market by 10:1; that is, a fund that goes up 5% when it's 5% stocks and 95% cash implies the stocks rose by 100% while the cash stayed at zero. In normal markets, Morningstar observed that Mr. Cinnamond's funds "trounced nearly all equity funds."

    But markets have ceased being normal. The market's become addicted to the Fed put; that is, to the willingness of the Fed to move heaven and earth to keep things propped up. Here's a thought experiment: unemployment is low, the economy is growing, corporate taxes have been slashed, the market's at record highs, CEO comp is at record highs equity valuations are at their second-highest levels ever. What would happen if Powell announced that the Fed was taking the punch below away and normalized the fed funds rate? That would be rise of about a 1% rate to 3.5%, mid-range in their preferred 2-5% window. My guess is blind panic on Wall Street and Pennsylvania Avenue and a 50% adjustment in equity prices.

    Absolute value investors, like gold investors, are horrified and find very few values in such markets. So, they hold cash and get derided as idiots. If you think that the current conditions are permanent, value will continue to lag and absolute value will lag dramatically.


  • If that's the scenario, and the manager has not changed his stripes, then I see little reason to invest here until the market puts on scuba gear. I'd also like to get a glimpse of their portfolio holdings before committing funds. That's just me.
  • My recollection may be off a little but not as much as the accolades you give this guy David. If his stock picking was so great than it must have been his portfolio management that sucked, because the returns were terrible versus other small cap funds. Even his SCV peers. But does it matter why he did not have good returns. The fact is he under-performed and his investors lost money, you included I'm guessing. " have ceased to be normal" is no excuse. A fund manager needs to adjust. Why would anyone take that chance again?
  • Hi, guys.

    Well, yes. His strategy is fundamentally different than this peers. That would have been clear to anyone who read either the prospectus or his voluminous writings. He trailed his peers because he had up to 85% cash, which is consistent with his discipline and his long record. Relative value guys adjust, in the sense of buying the best of a bad lot if that's what's available. Absolute value guys are paid to stick to the discipline: buy if and only if there's a sufficient discount. Since every market goes through a period of overvaluation (the current one arguably since 2011), absolute value guys always have a period of radical outperformance and a period of radical underperformance. On the entire cycle, they typically come out ahead on total return and risk-adjusted return.

    We're in the longest bull market in history, with the longest period of elevated valuations, and so the longest period of underperformance by value (generally) and absolute value. That's why there are only a handful of absolute value managers left in business.

    As to investors losing money, he was in the black every year until 2014. In 2014, he posted a 2% loss while his peers posted a 3% gain. In 2015, he posted a 4% loss while his peers posted a 6.75% loss. In 2016 they liquidated mid-year with a small gain. The record from inception to liquidation was 4% or so.

    When the market tanks, he'll do well. 2019? 2020? 2050? I don't know. Sadly, when the market tanks, average investors panic and run away. They don't invest in funds like Cinnamond's until a year too late when he's beaten the market by 2000 - 3000 bps which means they miss the major gains and are closer to the point that he'll begin moving back to cash.

    As ever,


  • Why did it take him SIX years to figure out , that he should return investor money ?

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