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‘Underdog Status of ModivCare (MODV) Inc. Will Change Soon’, Summer Value Partners Projects

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  • MODV

Summers Value Partners, an investment management firm, published its ‘Summers Value Fund LP’ fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A net return of 14.7% was recorded by the fund for the Q4 of 2020, below its Russell 2000 benchmark that returned 18.40%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Summers Value Partners, in their Q4 2020 Investor Letter said that they acquired a position in ModivCare Inc. (NASDAQ: MODV) because they see further upside in the company over the next several years . ModivCare Inc. is a technology-centered healthcare services company that currently has a $2.2 billion market capitalization. For the past 3 months, MODV delivered a decent 36.65% return and settled at $158.69 per share at the closing of January 27th.

Here is what Summers Value Partners has to say about ModivCare Inc. in their investor letter:

"We initiated a position in ModivCare (formerly Providence Services Corp) in May after learning about the positive changes occurring at the company. ModivCare is the largest provider of non-emergency medical transportation (NEMT) services to patients nationwide with over 40% market share. Dan Greenleaf joined the company as CEO just over one year ago and has installed a new management team across the organization after years of poor management under the old regime. The new management team has implemented an attractive go-forward strategy and has already improved the company’s operating performance. Additionally, management has proven to be skilled capital allocators having repurchased stock during the pandemic sell-off while also making several value-creating acquisitions.

Recently, the company has re-oriented itself as a social determinants of health (SDOH) company following the acquisition of Simplura Health, a home personal care provider. The company’s mission is to break down the walls of inequality in the health care system by connecting lower income patients to physicians and in-home care providers. The company’s mission also includes delivering food and meals to homebound patients, and the suite of services offered could expand further in the future. We believe that the company is well positioned to grow profitably over the next several years as insurance providers (both commercial and government) include these benefits into their plan offerings.

Despite the recent run-up in the stock price, we see further upside in ModivCare over the next several years. The key drivers include growing market adoption of the company’s service offering and a more streamlined and efficient business model as a result of technology upgrades coupled with additional acquisitions in the personal care industry. While 2021 could be a challenging year for earnings growth due to the benefits realized from the COVID-19 pandemic in 2020, we still believe the company can earn more than $10 per share annually over the next few years. The company’s Matrix Medical ownership (43.6%) represents an additional value driver as recent acquisition multiples suggest that stake could be worth upwards of $400 million (pre-tax). We believe this value could be realized in 2021. Lastly, the company continues to be under-followed by Wall Street, which we expect to change in the future."

Doctor Specialties with Best Lifestyle
Doctor Specialties with Best Lifestyle

Yuganov Konstantin/Shutterstock.com

MODV delivered a massive 147.99% return in the past 12 months. However, our calculations show that ModivCare Inc. (NASDAQ: MODV) does not belong in our list of the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 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 daily newsletter on our website.

Disclosure: None. This article is originally published at Insider Monkey.