Is Electromed (ELMD) a Smart Long-term Buy?

Summers Value Partners recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of -1.2% in the first nine months of 2020, outperforming its benchmark, the Russell 2000 Index which returned -9.6% in the same period. You should check out Summers Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners this year.

In the said letter, Summers Value Partners highlighted a few stocks and Electromed Inc. (NYSE:ELMD) is one of them. Electromed Inc. (NYSE:ELMD) manufactures, markets and sells products that provide airway clearance therapy for patients compromised pulmonary function. Year-to-date, Electromed Inc. (NYSE:ELMD) stock gained 2.4% and on October 15th it had a closing price of $8.85. Here is what Summers Value Partners said:

“Electromed reported an acceptable second quarter result given the negative headwinds created by the COVID-19 pandemic. Second quarter revenue declined by 20% y/y, but the company generated a profit along with positive cash flow even after a one-time benefit from the CARES Act. Electromed ended the period with over $10 million of cash on the balance sheet againstzero debt. The long-term growth outlook for the company’s SmartVest product remains unchanged, and we expect the company’s performance to improve as the pandemic subsides.

We continue to see material upside in Electromed’s shares. The stock screens as particularly attractive relative to a peer group of profitable, small-cap medical device stocks. Electromed trades at 2x enterprise value to current year sales while a peer group of ten companies trades at a mean enterprise value to current year sales of 6x. Within the peer group, Electromed is one of the few companies that has consistently generated profits and positive cash flow, and it features one of the highest gross margins. Our discounted cash flow-based price target is $17.50 per share. We also believe the company represents an attractive takeout candidate at the current price.”

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Last month, we published an article revealing that Electromed Inc. (NYSE:ELMD) stock has outperformed the S&P 500 Index in the trailing one year period.

In Q1 2020, the number of bullish hedge fund positions on Electromed Inc. (NYSE:ELMD) stock increased by about 300% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in Electromed’s growth potential. Our calculations showed that Electromed Inc. (NYSE:ELMD) 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. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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. 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.