Enhabit (EHAB) Faces Challenges Post-Spinoff but Remains Attractive

Investment management company Curreen Capital released its third quarter 2024 Investor letter. A copy of the letter can be downloaded here. Although the overall market has seen an increase, many of the “ugly duckling” stocks the firm is concentrating on have become cheaper. This creates excellent opportunities to buy quality businesses while they are temporarily out of favor in the stock market. In the third quarter, the fund was up 0.9% compared to 5.89% for the S&P 500 Index. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.

Curreen Capital highlighted stocks like Enhabit, Inc. (NYSE:EHAB), in the third quarter 2024 investor letter. Enhabit, Inc. (NYSE:EHAB) is a US-based home health and hospice services provider. The one-month return of Enhabit, Inc. (NYSE:EHAB) was 10.00%, and its shares lost 14.84% of their value over the last 52 weeks. On November 7, 2024, Enhabit, Inc. (NYSE:EHAB) stock closed at $7.92 per share with a market capitalization of $398.244 million.

Curreen Capital stated the following regarding Enhabit, Inc. (NYSE:EHAB) in its Q3 2024 investor letter:

“We sold our shares in Advantage Solutions, added to Advance Auto Parts and Enhabit, Inc. (NYSE:EHAB). During the third quarter we added to two turnarounds: Advance Auto Parts and Enhabit, putting 1.5% of the fund into each of them. Our strategy is to add to such businesses at predetermined discounts to my estimate of their downside valuation. I am often surprised by how far down the market will push unpopular stocks. We respond to this dynamic by starting small and buying more as the stock price drops. We added to Advance Auto Parts at $45.49 per share, and to Enhabit at $7.83 per share.

Enhabit provides healthcare and hospice services in patients’ homes. The company serves patients covered by Medicare, Medicare Advantage, private Insurance and Medicaid – with reimbursement rates declining in that order, from the higher levels paid by Medicare to the lower levels paid by Medicaid. Enhabit was spun out of Encompass Health in July 2022. Historically, the business earned high returns on capital and grew both organically and through acquisitions. The company has struggled since the spinoff, with declining revenues and higher costs, which drove it to repeatedly seek covenant relief from its lenders. Enhabit currently trades at an attractive upside-to-downside ratio.”

An elderly patient receiving an infusion therapy in a hospital bed.

Enhabit, Inc. (NYSE:EHAB) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held Enhabit, Inc. (NYSE:EHAB) at the end of the second quarter which was 23 in the previous quarter. Consolidated net revenue of Enhabit, Inc. (NYSE:EHAB) in the second quarter was $260.6 million, down 0.6% year-over-year. While we acknowledge the potential of Enhabit, Inc. (NYSE:EHAB) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.

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