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 Dick’s Sporting Goods Inc. (NYSE:DKS) is one of them. Dick’s Sporting Goods is a sporting goods retail company. Year-to-date, DKS stock lost 40.3% and on May 18th it had a closing price of $29.65. Here is what Palm Valley Capital said:
“Dick’s Sporting Goods (DKS) is a market leading retailer of sporting goods. Through its 850 stores, Dick’s provides consumers with an extensive selection of sporting equipment, apparel, and footwear. Although we understand the challenges Dick’s and other retailers are facing, we are encouraged by the company’s abundant liquidity ($69 million in cash and $1.36 billion credit facility availability) and underleveraged balance sheet (0.35x Debt to EBITDA). We expect Dick’s will survive the current retail recession and believe its stock is selling below our discounted cash flow valuation.”
In Q4 2019, the number of bullish hedge fund positions on DKS stock remained unchanged from the previous quarter (see the chart here).
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.