Greystone Capital recently released its Q2 2020 Investor Letter, a copy of which you can download here. Greystone is a privately held investment company. The investment firm seeks to simplify and add value by identifying opportunities in good and bad markets. You should check out Greystone 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, Greystone Capital highlighted a few stocks and CRH Medical Corp (NYSEAMERICAN:CRHM) is one of them. CRH Medical Corp (NYSEAMERICAN:CRHM) is a healthcare products and services company. Year-to-date, CRH Medical Corp (NYSEAMERICAN:CRHM) stock lost 23.3% and on August 17th it had a closing price of $2.65. Here is what Greystone Capital said:
“CRH Medical Corp. is a stock clients have owned since late 2017, and have occasionally traded in and out of the name as it’s been one of the more volatile stocks in client portfolios. This is not my preferred method of trading as I consider myself a buy and hold investor that enjoys taking advantage of the magic of earnings/free cash flow growth and multiple expansion, yet the reality is that this stock at different prices represents different levels of risk, reward and forward return profiles. Despite having a steady and reliable stream of cash flows in the form of anesthesia services for GIs providing colonoscopies (even in an economic downturn or recessionary scenario, it is still wise for seniors to get regular checkups), CRHM is subject to government healthcare reimbursement risk, or the risk that their billing rates for the services they provide will decrease meaningfully with the stroke of a pen. Although the last time reimbursement rates were cut was in late 2017/early 2018 (providing more opportunity to buy), with no further cuts or re-examinations of rates coming for the next few years, the stock price has continued to fluctuate widely, going from a high of $8.25 in early 2017, to a low of $1.85 in late 2017, back up to $3-4/share in 2018 and 2019, and now back to a sub-$2.00 share price. All of this takes place during a time when CRHM has acquired multiple businesses, grown revenues and free cash flow in the high single / low double digits, and hired a new CEO to accelerate growth. In a stroke of good luck and good timing, I significantly reduced our position in CRHM in early 2020 following a doubling of the share price from our initial cost, leaving us with a decently sized cash position and coinciding with the most recent share price drop to below $1.00 due to a weak quarter and fears surrounding COVID-19. While we didn’t exactly purchase at five-year lows of $0.85, clients now own CRHM once again at an incredibly cheap price that at one point over the past few weeks was implying that the company’s equity would be wiped out. CRHM is now a $120mm market cap business that is set to generate $25-$40mm in free cash flow per year over the next several years growing at a high single digit rate. With a new management team in place focused on growing a complementary segment of the business, increasing the pace and volume of acquisitions, and continuing to grow free cash flow per share, CRHM has the potential to double or triple from our current cost basis. While short term results will without a doubt be impacted by the length of the coronavirus quarantine, over the long-term we should see a return to normal activity levels followed by both free cash flow increasing as well as multiple expansion. For those worried about debt levels used to make acquisitions and operate the business, CRHM has plenty of liquidity with a new $100mm facility issued by JP Morgan, and a conservative debt/EBITDA ratio of 1.34x, with interest coverage at 3.5x.”
In Q1 2020, the number of bullish hedge fund positions on CRH Medical Corp (NYSEAMERICAN:CRHM) stock remained unchanged from the previous quarter (see the chart here). Our calculations showed that CRH Medical Corp (NYSEAMERICAN:CRHM) isn’t ranked among the 30 most popular stocks among hedge funds.
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Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.