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Is this a Good Time to Add TrueBlue (TBI) to Your Portfolio?

Soumya Eswaran
·3-min read

Palm Valley Capital Management, an investment management firm, released the “Palm Valley Capital Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, Palm Valley Capital Fund increased 0.79% compared to a 3.11% and 3.64% decline for the S&P SmallCap 600 Index and the Morningstar Small Cap Index, respectively. In Q2, small caps continued their trend of underperforming big caps. The fund's equity securities saw a slight increase of +0.24% in Q2 before operational expenses (fees).  On the other hand, interest received on Treasury bills boosted quarterly profit. At the end of the period, cash equivalents made up 81.4% of the firm's assets. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.

Palm Valley Capital Management highlighted stocks like TrueBlue, Inc. (NYSE:TBI), in the second quarter 2024 investor letter. TrueBlue, Inc. (NYSE:TBI) is a specialized workforce solutions provider. The one-month return of TrueBlue, Inc. (NYSE:TBI) was -11.29%, and its shares lost 46.90% of their value over the last 52 weeks. On July 9, 2024, TrueBlue, Inc. (NYSE:TBI) stock closed at $9.43 per share with a market capitalization of $288.271 million.

Palm Valley Capital Management stated the following regarding TrueBlue, Inc. (NYSE:TBI) in its Q2 2024 investor letter:

"The three holdings most negatively impacting the Fund’s return this quarter were Amdocs (ticker: DOX), TrueBlue, Inc. (NYSE:TBI) and Carter’s (ticker: CRI), which all had a similar drag on performance.

TrueBlue, a staffer specializing in blue-collar roles, has rarely lost money over its history, but it produced operating losses over the past year and recently coughed up its worst quarterly performance ever. Unlike Amdocs, it’s a highly cyclical business. The company has been behind the curve on reducing operating expenses to match falling revenues, but the new management team is adjusting the cost structure more actively since the industry pullback is continuing. We believe the company can remain near breakeven while the demand drought for staffers persists.

Over the last 10 years, the average annual operating profit generated by the firm was $75 million. TrueBlue’s current enterprise value is $280 million. TrueBlue has no debt and significant access to liquidity between its cash resources and credit facility. The company’s stock is also trading below tangible book value. Many investors today are chasing companies that are performing well when the stock price more than reflects it. With TrueBlue, we think we’re getting involved near a cycle low when the price more than reflects temporary challenges."

A busy industrial worker in their uniform operating machinery in a factory setting.

TrueBlue, Inc. (NYSE:TBI) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held TrueBlue, Inc. (NYSE:TBI) at the end of the first quarter which was 17 in the previous quarter. In the first quarter, TrueBlue, Inc. (NYSE:TBI) reported $403 million in revenue, down 13% compared to Q1 2023. While we acknowledge the potential of TrueBlue, Inc. (NYSE:TBI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Palm Valley Capital Management added TrueBlue, Inc. (NYSE:TBI) to its portfolio in Q2 2023. TrueBlue, Inc.'s (NYSE:TBI) performance in Q1 2024 hurt Palm Valley’s overall earnings. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

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