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 Scholastic Corp (NASDAQ:SCHL) is one of them. Scholastic is the world's largest publisher and distributor of children's books. Year-to-date, SCHL stock lost 26.8% and on May 18th it had a closing price of $28.48. Here is what Palm Valley Capital said:
"Scholastic (SCHL) is the world’s top publisher and distributor of children’s books and provides instructional materials for grades pre-K to 12. Popular original titles include Harry Potter, The Hunger Games, Captain Underpants, Dog Man, and Clifford the Big Red Dog. While children’s book sales are relatively recession-resistant, Scholastic’s school-based book fairs and clubs will be adversely impacted by the closure of schools across the country. Nevertheless, the firm entered the crisis with a cash-rich balance sheet and significant owned real estate assets. We bought the stock at a discount to tangible book value."
In Q3 2019, the number of bullish hedge fund positions on SCHL stock increased by about 14% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with SCHL’s growth 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.