McIntyre Partnerships, an investment management company released its fourth quarter investor letter. McIntyre Partnerships returned approx. 2% gross and 0% net through the end of 2024 compared to the Russell 2000 Value’s ~8% return. A copy of the letter can be downloaded here. The fund’s trailing five-year returns are about 27% gross and 22% net annually compared to benchmark’s return of about 7% annually. For the first time since 2019, the fund underperformed its benchmark in 2024, which was not a good year. The underperformance was driven by declines in several large, long-held positions in the portfolio. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
In its fourth quarter 2024 investor letter, McIntyre Partnerships emphasized stocks such as Sotera Health Company (NASDAQ:SHC). Sotera Health Company (NASDAQ:SHC) offers sterilization, lab testing, and advisory services. The one-month return of Sotera Health Company (NASDAQ:SHC) was 3.85%, and its shares lost 18.84% of their value over the last 52 weeks. On February 14, 2025, Sotera Health Company (NASDAQ:SHC) stock closed at $13.48 per share with a market capitalization of $3.818 billion.
McIntyre Partnerships stated the following regarding Sotera Health Company (NASDAQ:SHC) in its Q4 2024 investor letter:
“Sotera Health Company (NASDAQ:SHC) is a high-quality company where exaggerated legal liabilities and, to a lesser extent, a market downturn have presented an excellent entry multiple in my opinion. In a vacuum, SHC screens as my ideal type of business: one half of a duopoly market with good long-term growth where the product sold is mission critical to customers with high switching costs, yet the product’s price is immaterial to their customers. In the case of SHC, the company is one of two scaled outsourced medical device and pharmaceutical sterilization services providers. SHC is diversified across almost all major medical device and pharmaceutical manufacturers, boasts a 100% retention rate with top customers, and has consistently grown sales at close to 10%, albeit sales have slowed to 5% in the present downturn. Further, sterilization represents ~1-5% of their customers’ cost of goods sold, and SHC has an ~55% EBITDA margin. Normally, a consistent 10% growth story with 55% margins would trade at a significant multiple. Indeed, from when SHC IPOed in late 2020 until legal fears derailed the stock in fall 2022, shares consistently traded over 18x EV/EBITDA and 25x P/E. However, due to the market’s perception of its legal risks and end-market downturn, shares currently trade less than 10x my 2025 EV/EBITDA and 13x my 2025 EPS.
As astute partners may notice, the above paragraph is almost verbatim to our Q4 2023 letter. This is no accident – nearly nothing has changed to our business and valuation analyses. There has been no increase in competition, no change in technology, no loss of customers, etc. On the surface, SHC would appear to have had a pretty standard, albeit slow, year. Sales and EBITDA grew roughly 5%, towards the low end of their historical growth rate due to previously communicated customer destocking, and the company paid down ~5% of its debt. Despite this, shares fell 19% last year…” (Click here to read the full text)
A worker in a cleanroom laboratory environment, performing gamma and electron beam irradiation for medical devices.
Sotera Health Company (NASDAQ:SHC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held Sotera Health Company (NASDAQ:SHC) at the end of the third quarter which was 38 in the previous quarter. While we acknowledge the potential of Sotera Health Company (NASDAQ:SHC) 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 another article we discussed Sotera Health Company (NASDAQ:SHC) and shared the list of best medical stocks to buy under $20. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.