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 Advance Auto Parts Inc (NYSE:AAP) is one of them. Advance Auto Parts is an automotive aftermarket parts provider. Year-to-date, AAP stock lost 18.8% and on May 15th it had a closing price of $126.06. Its market cap is of $9.0 billion. Here is what Palm Valley Capital said:
"Advance Auto Parts (AAP) is a leading auto parts retailer that sells to professional and retail customers. Auto parts stores have been deemed essential businesses by most states. We bought shares of Advance Auto during the swoon in retail stocks at a low multiple of trailing earnings. We believe auto parts sales will not be as dramatically affected as many other retailers during this time."
In Q4 2019, the number of bullish hedge fund positions on AAP stock increased by about 2% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with AAP’s upside 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.