Can Resources Connection (RGP) Withstand the Current Industry Recession?

Palm Valley Capital Management, an investment management firm, released the “Palm Valley Capital Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, Palm Valley Capital Fund increased 0.79% compared to a 3.11% and 3.64% decline for the S&P SmallCap 600 Index and the Morningstar Small Cap Index, respectively. In Q2, small caps continued their trend of underperforming big caps. The fund’s equity securities saw a slight increase of +0.24% in Q2 before operational expenses (fees).  On the other hand, interest received on Treasury bills boosted quarterly profit. At the end of the period, cash equivalents made up 81.4% of the firm’s assets. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.

Palm Valley Capital Management highlighted stocks like Resources Connection, Inc. (NASDAQ:RGP), in the second quarter 2024 investor letter. Resources Connection, Inc. (NASDAQ:RGP) offers consulting services to business customers. The one-month return of Resources Connection, Inc. (NASDAQ:RGP) was -8.08%, and its shares lost 39.03% of their value over the last 52 weeks. On July 9, 2024, Resources Connection, Inc. (NASDAQ:RGP) stock closed at $9.78 per share with a market capitalization of $330.637 million.

Palm Valley Capital Management stated the following regarding Resources Connection, Inc. (NASDAQ:RGP) in its Q2 2024 investor letter:

“We purchased one new position during the second quarter. Resources Connection, Inc. (NASDAQ:RGP) is a global consulting firm focused on project execution. The company’s 4,100 professionals specialize in facilitating initiatives associated with business transformation, strategic transactions, or regulatory change. Many employees have Big Four or legal backgrounds. In the mid 2000’s RGP was viewed as the best public company play on Sarbanes Oxley compliance requirements, leading to a temporary profit boom. Besides consulting projects, the company also competes on the high end of professional staffing. RGP works with over 2,000 clients, including 87% of the Fortune 100.

Factoring in RGP’s extremely clean balance sheet, the business has never been priced this low since its IPO over 20 years ago. While results have been on a consistent downward slide for almost two years, the performance is consistent with other providers of consulting and temporary staffing. The stock’s valuation multiples are appealing on both a trailing and normalized basis, although RGP’s financials have not yet bottomed. RGP has generated positive free cash flow every year since going public. We believe it will survive the current industry recession.”

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Resources Connection, Inc. (NASDAQ:RGP) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Resources Connection, Inc. (NASDAQ:RGP) at the end of the first quarter which was 15 in the previous quarter. Resources Connection, Inc. (NASDAQ:RGP) delivered $151.3 million in revenues in the third fiscal quarter of 2024, which was in line with the outlook range provided in January. While we acknowledge the potential of Resources Connection, Inc. (NASDAQ:RGP) 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 addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.