Crawford & Company (CRD-A) Left a Negative Mark on Palm Valley Capital’s Q3 Portfolio

Palm Valley Capital Management, an investment management firm, published its third-quarter 2022 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of -1.83% was recorded by the fund for the third quarter of 2022, while its benchmarks, the S&P SmallCap 600 Index, by comparison, returned -5.20%, and -3.75% return for the Morningstar Small Cap Index over the same period. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.

In its Q3 2022 investor letter, Palm Valley Capital Management mentioned Crawford & Company (NYSE:CRD-A) and explained its insights for the company. Founded in 1941, Crawford & Company (NYSE:CRD-A) is an Atlanta, Georgia-based claims management company with a $275.1 million market capitalization. Crawford & Company (NYSE:CRD-A) delivered a -21.63% return since the beginning of the year, while its 12-month returns are down by -34.19%. The stock closed at $5.87 per share on October 12, 2022.

Here is what Palm Valley Capital Management has to say about Crawford & Company (NYSE:CRD-A) in its Q3 2022 investor letter:

“The three positions that had the greatest negative impact on the Fund during the third quarter includes Crawford & Company (ticker: CRD/A, CRD/B). Crawford, the claims management provider, has weighed on the portfolio since we reentered the position a couple years ago. It is a controlled company. Extreme weather can boost Crawford’s results, since the firm possesses a large and capable army of claims adjusters. In our opinion, management has been overly focused on driving revenue growth instead of maximizing profitability. Second quarter sales for Crawford were up 10%, but operating profit declined by a third from the prior year. The firm’s international operations have delivered unsatisfactory results for eighteen months, but even the company’s high margin Contractor Connection repair network business stumbled in Q2. Due to acquisition-driven debt growth and declining liquidity for the holding relative to the growing size of the Fund, we have limited our recent purchases. Yet, we believe Crawford trades at a meaningful discount to fair value—perhaps the largest discount in the Fund. The shares are selling for an Enterprise Value below 9x trailing operating profit, which we believe is less than normal, and for under 6x our estimate of normalized EBITA.”

Our calculations show that Crawford & Company (NYSE:CRD-A) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Crawford & Company (NYSE:CRD-A) was in 5 hedge fund portfolios at the end of the second quarter of 2022, compared to 8 funds in the previous quarter. Crawford & Company (NYSE:CRD-A) delivered a -17.44% return in the past 3 months. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q3 page.


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