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Should Value Investors Buy Healthcare Services Group (HCSG) Stock?

Alex Smith
·2 min read

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 Healthcare Services Group Inc (NASDAQ:HCSG) is one of them. Healthcare Services Group engages in professional management of ancillary services to various clients. Year-to-date, HCSG stock lost 3.6% and on May 18th it had a closing price of $23.90. Here is what Palm Valley Capital said:

"Healthcare Services Group (HCSG) is the leading provider of facility maintenance and dietary services for nursing homes, rehabilitation centers, and hospitals. The company provides services to over 3,000 facilities in the United States. We are attracted to Healthcare Services’ long operating history (founded in 1976), stable end markets, and strong balance sheet. We consider its business and stock to be high-quality. As such, we were pleasantly surprised when its shares fell sharply and traded below our calculated valuation during the quarter."

In Q4 2019, the number of bullish hedge fund positions on HCSG stock increased by about 13% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with HCSG’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:

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