Summers Value Partners, an investment management firm, published its “Summers Value Fund LP” first quarter 2021 investor letter – a copy of which can be downloaded here. A net return of 17.5% was delivered by the fund for the Q1 of 2021, outperforming its e Russell 2000 benchmark that delivered a 12.9% return, but below the Russell Micro-Cap Index that had a 24.0% gain in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Summers Value Partners, in their Q1 2021 investor letter, mentioned Electromed, Inc. (NYSE: ELMD) and shared their insights on the company. Electromed, Inc. is a New Prague, Minnesota-based medical device company that currently has an $89.5 million market capitalization. Since the beginning of the year, ELMD delivered a 5.71% return, while its 12-month return are down by -18.15%. As of April 21, 2021, the stock closed at $10.37 per share.
Here is what Summers Value Partners has to say about Electromed, Inc. in their Q1 2021 investor letter:
“Position Update: Electromed (ELMD) – $90 Million Market Cap
Electromed is one of Fund’s long-standing investments, and it continues to be a top position today. We remain bullish on the company despite the stock having appreciated over 100% since we began buying shares in 2018. In the fourth quarter of 2020, the company performed better-than-expected, setting records for both sales and profits, while at the same time spending a record amount of money on R&D to support a new product launch.
It is our belief that impending index changes have kept the stock from reflecting the company’s strong fundamentals. It was announced that Electromed would be added to the Russell 3000 Index in May of last year. Unfortunately, the stock has underperformed the indexes since it was added while many other companies are trading at significantly higher valuations. As such, we believe that Electromed could be deleted from the Russell 3000 Index this year. The deletion may cause indiscriminate selling on the announcement although we believe some of this selling (or shorting) has already occurred. We are prepared to add to our position on any weakness related to an index deletion, which should be announced in early May. We believe the company can generate 50 cents in earnings in FY22 (June fiscal year) with additional growth in future periods. With an un-levered balance sheet ($27 million of cash and receivables) and an industry-leading gross margin (78%), we believe the company represents an attractive takeout candidate if the stock does not appreciate to reflect the company’s favorable outlook. Our price target remains $17.50, which represents 70% upside from the current price.”
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Our calculations show that Electromed, Inc. (NYSE: ELMD) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Electromed, Inc. was in 6 hedge fund portfolios. ELMD delivered a 4.01% return in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 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. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
