Bernzott Capital Advisors recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -32.76% (net) for the quarter, outperforming its benchmark, the Russell 2000 Value Index which returned -35.66% in the same quarter. You should check out Bernzott Capital Advisors top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Bernzott Capital Advisors highlighted a few stocks and Medpace Holdings Inc. (NASDAQ:MEDP) is one of them. Medpace is a clinical contract research organization based in Cincinnati, Ohio. Year-to-date, MEDP stock lost 4.5% and on May 13th it had a closing price of $80.25. Its market cap is of $2.84 billion. Here is what Bernzott Capital Advisors said:
“Medpace (MEDP): MEDP, a clinical contract research organization (CRO), reported solid 4Q19 and 2019 results and 2020 guidance above consensus. Net business awards in 4Q19 were very strong, +21.6% vs. last year and book-to-bill ratio was 1.22x. For the full-year, net new business awards were $1.1 billion, +21.7%. Ending backlog at year-end was $1.3 billion, +21.3% vs. last year. Backlog provides ~55% revenue visibility over the next 12 months. Oncology remains the largest therapeutic area (30%). MEDP continues to service small and mid-size biopharma clients that represent the majority of their client base (small 71%, mid 19%, large 10%). 4Q19 Adjusted EBITDA $41.1 million, +1.1% vs. last year and Adjusted EBITDA margin was 17.9% +60 bps vs. consensus and -330 bps vs. last year. The margin decline vs. last year was expected and was driven by higher employee related costs and reimbursed expenses. MEDP has been aggressively increasing headcount to meet demand (+19.5% vs. last year) but management indicated they will not be hiring further. Capex in 2019 was ~$18 million or ~2% of revenue and a similar level of spending is expected in 2020. Company is focused on organic growth and does not appear to be interested in M&A at this time, rather will focus on opportunistically buying back stock with excess cash flow. Since coronavirus emerged, MEDP and other CROs have been under pressure concerns about funding for biotech companies and the ability to complete clinical trials. Biotech industry funding has remained robust year-todate. MEDP has not provided an update including clinical trials but some level of disruption is likely inevitable, although the company is well positioned with a significant backlog and a debt-free balance sheet with $132 million in cash. We trimmed MEDP in the past and maintained our relatively small position in the quarter.”
In Q4 2019, the number of bullish hedge fund positions on MEDP stock decreased by about 23% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.
