Avista Corporation (AVA) Offers Compelling Upside Relative to Risk

Palm Valley Capital Management, an investment management firm, has issued the third-quarter 2026 investor letter for the "Palm Valley Capital Fund." The letter can be downloaded here. During the quarter, the Palm Valley Capital Fund gained 1.61%, while the S&P SmallCap 600 Index fell 7.93% and the Morningstar Small Cap Total Return Index decreased by 5.60%. As of this period, 75.5% of the Fund's assets were in Treasury bills, and equity-only performance was 4.8%. In the quarter, small caps underperformed large caps, with the S&P 500 nearing its highs. High volatility in stocks during a rising market is similar to that of the tech bubble. Current trends show a preference for protecting present wealth over ensuring future prosperity, causing wealth redistribution through rising asset prices, resulting in societal disparities. The federal debt exceeding $40 trillion exemplifies this issue, with resources consumed today leading to future obligations. The situation raises critical questions about wealth distribution over time, rather than simply the current disparity between the rich and the poor. Also, check the fund's top five holdings to see its best picks in 2026.

In its third-quarter 2026 investor letter, Palm Valley Capital Fund highlighted Avista Corporation (NYSE:AVA), in which the fund initiated a small position during the quarter. Avista Corporation (NYSE:AVA) is a US-based electric and natural gas utility company. On October 02, 2026, Avista Corporation (NYSE:AVA) closed at $35.31, with a $2.96 billion market capitalization. Avista Corporation (NYSE:AVA) posted a ~8.41% YTD pullback, trading within a 52-week range of $34.46 to $43.50.

Palm Valley Capital Fund stated the following regarding Avista Corporation (NYSE:AVA) in its Q3 2026 investor letter

"Toward the end of the quarter, we initiated small positions in Avista Corporation (NYSE:AVA) and Smithfield Foods (ticker: SFD). Founded in 1889, Avista is a regulated utility serving approximately 429,000 electric and 386,000 natural gas customers across Washington, Idaho, and Oregon. Avista also owns Alaska Electric Light & Power, which provides regulated electric service to approximately 18,000 customers. We've owned Avista in the portfolio before, selling our position last year after the stock exceeded our valuation. Like many utility stocks, Avista has recently been pressured by higher interest rates. In addition, a wildfire in its service territory during the quarter likely contributed to the stock's weakness. Avista has a long history of steadily growing book value and dividends. With its shares currently trading near tangible book value and at approximately 13.5x estimated earnings, we believe the stock once again offers an attractive potential return relative to the risk assumed."

Avista Corporation (NYSE:AVA) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held Avista Corporation (NYSE:AVA) at the end of the second quarter, which was 30 in the previous quarter. While we acknowledge the potential of Avista Corporation (NYSE:AVA) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we discussed Avista Corporation (NYSE:AVA) and shared a list of stocks that beat earnings expectations. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.

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This article is originally published at Insider Monkey.