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Why Oak Street Health (OSH) Stock is a Compelling Investment Case

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Alex Smith
·4 min read
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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."

Professions With the Highest Suicide Rates in America
Professions With the Highest Suicide Rates in America

Tyler Olson/Shutterstock.com

Our calculations showed that Oak Street Health Inc. (NYSE:OSH) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 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 enewsletter below to receive our stories in your inbox:

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