Palm Valley Capital recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of 0.79% for the quarter, outperforming its benchmark, the S&P Small Cap 600 Index which returned -32.65% in the same quarter. You should check out Palm Valley Capital’s top 5 stock picks which helped them beat the market by nearly 33 percentage points. 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, Palm Valley Capital highlighted a few stocks and Benchmark Electronics Inc (NYSE:BHE) is one of them. Benchmark Electronics provides contract electronics manufacturing and design services. Year-to-date, BHE stock lost 39.3% and on May 18th it had a closing price of $20.85. Here is what Palm Valley Capital said:
“Benchmark Electronics (BHE) is an electronics contract manufacturer and service provider. Benchmark provides its services to a variety of original equipment manufacturers (OEMs) in the computing, industrial, medical, and semiconductor industries. We are attracted to Benchmark’s very strong and liquid balance sheet, which includes $5.60/share in net cash and $19/share in net working capital. At the time of purchase, Benchmark was trading at a discount to its net working capital and our discounted cash flow valuation.”
In Q4 2019, the number of bullish hedge fund positions on BHE stock increased by about 27% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with BHE’s upside potential.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.