Palm Valley Capital recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 0.89% for the quarter, underperforming its benchmark, the S&P Small Cap 600 Index which returned 3.17% in the same quarter. You should check out Palm Valley Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the said letter, Palm Valley Capital highlighted a few stocks and Now Inc. (NYSE:DNOW) is one of them. Now Inc. (NYSE:DNOW) is an industrial supplies company. Year-to-date, Now Inc. (NYSE:DNOW) stock lost 55.3% and on October 6th it had a closing price of $5.06. Here is what Palm Valley Capital said:
“NOW is a 2014 spinoff from National Oilwell Varco and has a 150-year legacy as a distributor to the oil and gas and industrial markets. Through a vast network of 245 locations, NOW’s 300,000 SKU product offering addresses all segments of the energy value chain, from upstream E&Ps to midstream infrastructure to downstream refining, in addition to industrial end markets including chemicals, mining, utilities, and manufacturing. When energy companies reduce activity, NOW suffers. However, it has streamlined its business since the last oil and gas downturn and expects reduced operating losses this round. As of June 30th, NOW had $269 million of cash and no debt ($497 million market cap), although if demand recovers as we expect, some cash will be reinvested in working capital. The stock is currently selling for 66% of tangible book value.
Pason and NOW represent our fourth and fifth investments in the energy sector. The active rig count in the U.S. is at all-time lows. When considering our timing, we concluded, if not now, when? Our largest energy holding is Helmerich & Payne, the nation’s largest drilling contractor. It’s selling for half of book value. We believe the financial strength of our holdings is far above the typical energy company. Even so, we have kept our exposure to the energy sector in check given our concerns about the overall economy.”
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In Q1 2020, the number of bullish hedge fund positions on Now Inc. (NYSE:DNOW) stock decreased by about 10% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Now’s growth potential. Our calculations showed that Now Inc. (NYSE:DNOW) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 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. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.
