Should Value Investors Buy Scholastic Corp (SCHL) Stock?

Palm Valley Capital recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 0.89% for the quarter, underperforming its benchmark, the S&P Small Cap 600 Index which returned 3.17% in the same quarter. You should check out Palm Valley Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Palm Valley Capital highlighted a few stocks and Scholastic Corp (NASDAQ:SCHL) is one of them. Scholastic Corp (NASDAQ:SCHL) publishes and distributes children’s books worldwide. Year-to-date, Scholastic Corp (NASDAQ:SCHL) stock lost 44.0% and on October 7th it had a closing price of $21.55. Here is what Palm Valley Capital said:

“We have keenly focused on limiting financial risk for our energy investments, given the volatility of the industry, and several non-energy holdings in our portfolio were valued using the balance sheet as a foundation. Scholastic (ticker: SCHL) is the world’s largest publisher of children’s books and has been around for 100 years. The company’s net cash equals 20% of its market cap, and it owns two 10 story buildings in Manhattan. The stock was slammed by a steep drop in the number of schools conducting book fairs as a result of COVID-19 concerns. We believe the firm will move past this issue next year, and in the meantime, Scholastic is ringing up strong sales of bestsellers like Dog Man: Grime and Punishment (#1 book in the world). Scholastic trades at nearly a 30% discount to tangible book value.”

Pixabay/Public Domain

In Q1 2020, the number of bullish hedge fund positions on Scholastic Corp (NASDAQ:SCHL) stock decreased by about 27% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Scholastic’s growth potential. Our calculations showed that Scholastic Corp (NASDAQ:SCHL) 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

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