Artko Capital recently released its Q4 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 17.2% for the quarter, outperforming its benchmark, the S&P 500 Index which returned 12.2% in the same quarter. You should check out Artko Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the Q4 2020 Investor Letter, Artko Capital highlighted a few stocks and Shyft Group Inc. (NASDAQ:SHYF) is one of them. Shyft Group Inc. (NASDAQ:SHYF) is a manufacturing company. In the last three months, Shyft Group Inc. (NASDAQ:SHYF) stock gained 54.7% and on February 3rd it had a closing price of $32.86. Here is what Artko Capital said:
“Shyft Group (SHYF ) – Our biggest contributor to our performance this quarter has been our position in Shyft Group appreciating 50% (and 70% through January 2021). Despite substantial pockets of the US economy still shut down and the company suffering through a resulting slow down in the first half of 2020, the delivery vehicle assembly manufacturer recorded a record margins and backlog increase though October on the strength of unprecedented demand for parcel delivery vehicles.
One of the main reasons we invested in Shyft Group, formerly Spartan Motors, over three years ago was due to our confidence in the CEO, Daryl Adams. He did not disappoint. While It has been a bumpy ride, with the 2018 trade war wreaking havoc on the logistical supply chain; the inability of the (now disposed) Emergency Response (ER) segment to become sustainably profitable; as well as the 2020 pandemic, the company continued to deliver on its promise. The Fleet Vehicle & Services (FVS) grew revenues from $250mm in 2017 to likely over $500mm in 2020, while expanding EBITDA margins by almost 10% during that time. At the same time Daryl did an outstanding job with capital allocation. It was clear that despite best efforts the ER segment was not sustainably profitable or able to earn its cost of capital and was an overall drag on the company’s growth and return on capital. It was a tough decision and not the best price at $55mm, but replacing the ER segment with investments in Royal Truck Body and DuraMag over the last couple of years expanded the company’s product suite, geographic footprint, and the ROIC/margin profile while at the same time continuing to maintain a conservative balance sheet.
With the stock running up 70% in a few months and deservedly expanding its multiple to 13x 2021 EBITDA, the 13% weight in the Core Portfolio was beginning to be bigger than we were comfortable with so we took approximately 5% off in January 2021 to keep the position at 8%. This was done both as a risk measure and as a redeployment of capital to a new idea. We believe the company can continue to grow revenues and margins for the foreseeable future and to generate the high teens IRR we expect out of our positions. However, with so many low hanging fruits picked off and much of the turnaround complete with a multi bagger return on the stock, we suspect Mr. Adams, a talented individual clearly destined for bigger things, will be looking to shop the company in the intermediate term. This is not a definitive statement by any means, but it is within our set of expectations for this position and we look forward to seeing what happens in the near term.”
Pixabay/Public Domain
Artko Capital has been a long time Shyft Group Inc. (NASDAQ:SHYF) bull. In August 2020, we shared Artko Capital’s bullish SHYF’s thesis in this article.
In Q3 2020, the number of bullish hedge fund positions on Shyft Group Inc. (NASDAQ:SHYF) stock decreased by about 28% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in Shyft’s growth potential. Our calculations showed that Shyft Group Inc. (NASDAQ:SHYF) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 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.
