Here’s Why Evermore Global Advisors Remains Optimistic in Emergent Capital (EMGCQ)

Evermore Global Advisors, an investment management firm, published its “Evermore Global Value Fund” fourth quarter 2020 investor letter – a copy of which can be downloaded here.  A return of 13.85% was recorded by the Institutional Class shares of the Evermore Global Value Fund (“EVGIX”) for the year end of 2020, outperforming its S&P 500 benchmark that delivered a 12.2% return, but slightly below its MSCI Europe index that delivered a 15.6% gain in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Evermore Global Advisors, in their Q4 2020 investor letter, mentioned Emergent Capital, Inc. (NYSE: EMGCQ) and shared their insights on the company. Emergent Capital, Inc. is a Boca Raton, Florida-based life insurance company that currently has an $34.9 million market capitalization.  As of April 07, 2021, the stock closed at $0.2201 per share.

Here is what Evermore Global Advisors has to say about Emergent Capital, Inc. in their Q4 2020 investor letter:

“Emergent Capital Inc. (Country: U.S.; Ticker: EMGCQ), a minority owner of a pool of life settlements, was the top detractor to Fund performance in the fourth quarter. The Fund’s investment in Emergent common shares fell by approximately 25.7% in the period, while its larger investment in the company’s Senior Notes generally held steady. The fourth quarter marked a turning point in the trajectory of this 3+ year investment. Specifically, on October 15, 2020, Emergent and a wholly owned subsidiary filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code to effect a restructuring of the Company.

Evermore has been supportive of such a filing, as bankruptcy protection affords Emergent the unique flexibility required to address its looming July 2021 debt maturity and strip additional costs from the business. Upon emergence from chapter 11, Emergent will be liquidated, and all its U.S. operations will cease to exist. Current investors in Emergent (across both equity and debt securities) will see their securities exchanged for similar securities in Lamington Road Designated Activity Company (“Lamington”), an Irish Section 110 company. Lamington is an existing subsidiary of Emergent and indirectly holds its 27.5% stake in a pool of approximately 500 life settlements. It is the intention of Lamington to list its securities on a Viennese exchange operated by the Wiener Börse AG sometime during the first quarter of 2021.

Given the complexity of the bankruptcy case, mixed with some current investors’ inability or trepidation to hold non-U.S. securities, we are not surprised that Emergent’s shares have been under pressure. With that said, we remain optimistic that the actions taken are the most effective means to unlock the significant and latent value within this unique portfolio. We note that Emergent’s Plan of Reorganization was confirmed on December 30, 2020, and the Plan is expected to become effective in early Q1 2021.”

Our calculations show that Emergent Capital, Inc. (NYSE: EMGCQ) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.