A Fund’s Exit from Brightstar: A Tale of Strategic Reassessment

It is with a certain degree of solemnity that we recount the actions of 1060 Capital Management, a Denver-based entity, which, during the third quarter, chose to divest its holdings in Brightstar Lottery, a company whose stock had, until recently, occupied a prominent place in the fund’s portfolio. The transaction, amounting to 307,200 shares, is estimated to have yielded approximately $4.9 million, marking a complete liquidation of the position.

The Circumstances of the Divestment

According to a recent filing with the Securities and Exchange Commission, the fund’s decision to relinquish its entire stake in Brightstar Lottery was executed with precision and finality. Prior to this, the holding constituted 9.8% of the fund’s 13F AUM as of June 2025, a proportion that now lies entirely in the past.

Notable Holdings Post-Filing

Among the fund’s principal holdings post-filing, the following stand out:

NYSE:RSI: $9.2 million (31.3% of AUM)
NYSE:PRIM: $6.9 million (23.3% of AUM)
NASDAQ:LULU: $5.3 million (18.1% of AUM)
NYSE:NVRI: $4.2 million (14.1% of AUM)
NYSE:MTZ: $2.1 million (7.2% of AUM)

As of the latest trading session, Brightstar Lottery’s shares were valued at $16.49, a figure that has declined by 17% over the past year, lagging significantly behind the S&P 500’s 13% gain during the same period.

Company Overview

Metric	Value
Price (as of market close Friday)	$16.49
Market capitalization	$3.2 billion
Revenue (TTM)	$2.5 billion
Net income (TTM)	$304 million

Company Snapshot

Brightstar Lottery, a distinguished global provider of technological solutions and services to the regulated lottery sector, has, in recent years, focused its efforts on core operations, divesting non-core assets to cultivate scalable, recurring revenue streams. Its competitive edge is rooted in its pure-play lottery model, an advanced technological infrastructure, and enduring relationships with government and private lottery operators across the globe.

The Foolish Take

The fund’s abrupt retreat from a high-conviction holding appears to signal a recalibration of risk, a maneuver befitting a catalyst-driven entity such as 1060 Capital. This fund, which seeks asymmetric opportunities with multiple avenues for profit, has evidently found the near-term prospects of Brightstar less appealing than the rest of its increasingly concentrated portfolio. After all, shares of Brightstar have languished over the past two years, hovering approximately 50% below their mid-2023 levels.

While caution is warranted, there are glimmers of hope. The company’s third-quarter revenue rose 7% to $629 million, and adjusted EBITDA increased by 11% to $294 million. However, this was accompanied by negative operating cash flow of $439 million, largely attributable to an upfront Italy Lotto license payment. Shares remain 17% lower than a year prior, a testament to the challenges faced.

It is worth noting that this exit coincided with the fund’s unwinding of MYR Group and Armstrong World Industries, alongside a pivot towards Lululemon and the establishment of a sizable Tesla put position. This suggests a broader strategic realignment rather than a mere critique of Brightstar’s fundamentals. For long-term investors, the lesson is not that Brightstar’s narrative is irreparably flawed, but that catalyst-driven funds will reallocate capital when the near-term upside diminishes, regardless of long-term potential.

Glossary

13F: A quarterly SEC filing by institutional investment managers disclosing their equity holdings.
Assets Under Management (AUM): The total market value of assets a fund or investment manager oversees on behalf of clients.
Full liquidation: Selling an entire investment position, resulting in a zero balance of that asset.
Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.
Dividend yield: Annual dividends per share divided by the share price, expressed as a percentage.
Pure-play: A company focused on a single line of business or industry segment.
Regulated lottery: A lottery operated under government oversight and legal frameworks.
Divested: Sold or disposed of a business unit or asset, often to focus on core operations.

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2025-11-17 01:18