Cedar Creek Partners has unveiled its performance for the first quarter of 2026, showcasing impressive growth and strategic portfolio management. Despite global economic headwinds, the fund delivered a 6.8% return, net of fees and expenses, significantly outpacing major U.S. indices. This achievement is a testament to the fund's focused investment philosophy, which prioritizes undervalued securities, particularly within the microcap and expert market segments. Over two decades, Cedar Creek has maintained an average annual return of 14.9%, consistently outperforming benchmarks and reaffirming its value proposition to investors.
Cedar Creek Partners Q1 2026 Performance and Strategic Insights
In the first quarter of 2026, Cedar Creek Partners navigated a challenging market landscape marked by increased geopolitical tensions in the Middle East. While the NASDAQ, S&P 500, and DJIA experienced declines of 7.1%, 4.4%, and 3.3% respectively, Cedar Creek achieved a notable 6.8% gain, net of fees and expenses. This performance extends the fund's long-term track record, with cumulative returns reaching an impressive 1,560.4% since its inception in January 2006. This translates to an average annual return of 14.9%, highlighting the fund's consistent ability to generate superior risk-adjusted returns compared to passive investment strategies.
The fund's investment strategy heavily relies on identifying and acquiring microcap and over-the-counter stocks, an area often overlooked by larger institutional investors. As of March 2026, Cedar Creek's holdings were trading at an attractive valuation of 7.2 times estimated forward earnings and 4.7 times expected earnings net of cash. The weighted price-to-book ratio stood at 0.9, with a dividend yield of 1.7% and an expected return on equity of 12.9% as of March 31, 2025.
Strategic adjustments in the portfolio included maintaining cash levels at just under 13% for most of the quarter, which has since decreased to below 10% as new attractive investment opportunities emerged. A significant development was the successful sale of First IC Bank and the subsequent divestment of MetroCity Bankshares, freeing up capital for reallocation.
Cedar Creek's exposure to the expert market, which comprises companies impacted by SEC Rule 15c2-11, was maintained at 30% of the fund. Key holdings in this segment include Exco Resources (EXCE), PHI Group (PHIG), Harbor Diversified (HRBR), and PD-Rx Pharmaceuticals (PDRX). Exco Resources, for example, trades at approximately four times its estimated 2026 earnings, significantly below its potential market value if it were publicly listed. PHI Group, a leading helicopter service provider, is believed to be undervalued by two to three times its current trading price. Harbor Diversified, a recent acquisition, shows promise with substantial cash holdings post-asset sales and is exploring strategic alternatives, including potential acquisitions or capital returns to shareholders.
A significant portion of the fund's first-quarter gains was attributed to its control position, Solitron Devices (SODI), which saw its bid price increase by 34%. The fund manager serves as CEO and a board member of Solitron, and the company benefits from increasing backlog in defense/aerospace, driven by demand for HIMARS launchers and various missiles. Public discussions around increased defense spending further underscore Solitron's growth potential.
The fund also maintains positions in other undervalued securities, such as ENDI Corp (ENDI), which despite a slight share price decline, continues to demonstrate strong growth in assets under management for its CrossingBridge Advisors subsidiary. Cedar Creek has also strategically built up its holdings in community banks, which now constitute about 16% of the fund. Top bank holdings include Steele Bancorp (STLE), Skyline Bankshares (SLBK), and River Financial Corp. (RVRF), all trading at attractive multiples of adjusted earnings and poised for growth or potential acquisition.
Cedar Creek Partners continues to seek new capital and encourages existing partners to increase their investments, emphasizing the abundance of attractive investment ideas. The fund remains committed to its philosophy of concentrated, value-driven investing to deliver superior long-term results.
The first quarter of 2026 letter from Cedar Creek Partners offers valuable insights into a successful, active investment approach that prioritizes deep value and strategic positioning. In an era where passive investing often dominates discussions, Cedar Creek's consistent outperformance underscores the potential rewards of rigorous research and a willingness to explore less-followed market segments. The fund's focus on microcap stocks and expert market opportunities, coupled with its disciplined valuation methodology, highlights a model where fundamental analysis and long-term vision can yield substantial returns. This report serves as a compelling reminder that even in volatile markets, a well-executed, conviction-driven strategy can not only weather the storm but thrive, providing significant value to its partners over extended periods.
