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If You Own Sharps Compliance (SMED) Stock, Should You Sell It Now?

Artko Capital recently released its Q2 2020 Investor Letter, a copy of which you can download here. The fund posted a return of -11.4% for the quarter, underperforming its benchmark, the S&P 500 Index which returned 20.5% in the same quarter. You should check out Artko Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Artko Capital highlighted a few stocks and Sharps Compliance Corp (NASDAQ:SMED) is one of them. Sharps Compliance Corp (NASDAQ:SMED) operates as a provider of waste management services. Year-to-date, Sharps Compliance Corp (NASDAQ:SMED) stock gained 84.6% and on August 6th it had a closing price of $7.79. Here is what Artko Capital said:

“Sharps Compliance (SMED) – 2020 was not all bad news for our holdings and we have had a chance to participate in some wild speculation of today’s markets via our position in Sharps Compliance which at one point surged almost a 100% from its year end closing price of $4.22 on the hopes that the medical waste disposal company will have an opportunity to participate in the significantly higher medical waste volumes as a result of Covid related activity. Sharps was a perfect example of our Core Portfolio strategy where we patiently added to the 10% position at what we considered “balance sheet” prices, i.e. the value of its working capital and incinerator was close to our mid $3s purchase price. In the meantime Sharps was on the cusp of significant operating leverage as a large part of their revenue growth from increased route density and opioid disposal kiosks would fall to the bottom line and the market would begin to give credit to the company for its future growth opportunities in the form of a higher stock price. As the value of our portfolio began to deteriorate significantly in March, the SMED stock surged to over $6.00 and as the position was over 20% of the overall portfolio, we took half of it off the table and added to our other positions. With the price continuing to surge past $7.00, or a 100% return in less than two years, and knowing the tendency of microcap stocks to “round trip”, we decided to book the profits for this position via a fortuitously available block sale at $7.00 as we were skeptical at the company’s ability to live up to its valuation in the near term. If the price does indeed roundtrip we will be more than happy to buy back in as we like the management team and the opportunity set.”

Dmitry Kalinovsky/Shutterstock.com

In Q1 2020, the number of bullish hedge fund positions on Sharps Compliance Corp (NASDAQ:SMED)  stock increased by about 400% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Sharps Compliance’s downside potential. Our calculations showed that Sharps Compliance Corp (NASDAQ:SMED)  isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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.