Nomadic Value Investment Partners recently released its Q3 2020 Investor Letter, a copy of which you can download here. The investment firm supports enterprising individuals and families in achieving respectable long-term investment performance. You should check out Nomadic Value’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the said letter, Nomadic Value highlighted a few stocks and Oak Street Health Inc. (NYSE:OSH) is one of them. Oak Street Health Inc. (NYSE:OSH) operates primary care clinics and healthcare centers. Oak Street Health Inc. (NYSE:OSH) stock gained 0.4% in the last one month and on October 26th it had a closing price of $51.19. Here is what Nomadic Value said:
“We made a farm team investment in Oak Street Health (OSH) late in September. The company is a primary care provider centered on the Medicare Advantage market and 42% of their members are “dual eligible” patients for both Medicare/Medicaid, a historically high risk and high cost patient population to serve6 . Oak Street serves them well with the company’s patient outcomes substantially better than traditional Medicare’s benchmark7 . They do this under full-risk VBC arrangements with Medicare Advantage plans, sharing in the substantial savings they generate to the system and helping their health plan partners achieve a higher star rating on their performance. The company is also a budding brand and is well known in the Chicago metro area and has plans to expand all over the US via de-novo clinic development and currently a trial partnership with Walmart.
Optically, OSH is expensive at our initial purchase price, creating the company at over $10 billion on 2020 expected revenues of $850 million. To justify the price, an investor must believe OSH can generate payer-like revenues and profits on directing total health spend for a substantial number of members. Currently, I believe the management team has a good shot at getting there given solid execution to-date and their current growth plans. Additional upside with even better unit economics stems from their trial with Walmart and CMS’s Direct Contracting program set to begin in 2021. The board of directors is top-notch, and the management team consistently speaks of firm culture as a true competitive advantage to the firm. I am hopeful towards all these positive developments and digging deeper each day into the company, but we conservatively modeled across a range of assumptions as well as sized the position appropriately as we watch OSH execute from here.”
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