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 Ezcorp Inc (NASDAQ:EZPW) is one of them. Ezcorp is a pawn shop operator. Year-to-date, EZPW stock lost 25.1% and on May 18th it had a closing price of $5.09. Here is what Palm Valley Capital said:
“EZCORP (EZPW) is the second largest operator of pawn shops in the U.S. and Mexico. The enterprise value per store is a fraction of its top competitor and is a discount to typical transaction multiples in the space. EZCORP’s balance sheet largely consists of assets such as cash, plus gold jewelry inventory and pawn loans, which can be converted to cash relatively quickly. We bought the shares at a significant discount to tangible book value and believe EZCORP’s business model is resilient during economic downturns.”
In Q3 2019, the number of bullish hedge fund positions on EZPW stock decreased by about 14% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with EZPW’s growth 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.