Penn Wealth Publishing

2020.11.01 Penn Wealth Report Vol 8 Issue 04

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01 nov 2020 penn wealth Report volume 8 issue 04 15 Penn Wealth Report Copyright 2020. All Rights Reserved. investment intelligence Under The radar Four investments being ignored—or missed—by the financial press Grocery Outlet Holding Consumer Defensive Grocery Stores Grocery Outlet Holding Corp (GO $28-$37-$48) is a fascinating story in a usually bor- ing industry: grocery stores. is $3.4 billion US-based mid-cap offers quality, name-brand products generally priced 40% to 70% below conventional retail chains. e stores are run by independent operators, and are designed to create a neighborhood feel through person- alized service and localized offerings. e outlet, which was founded by Jim Read (who began selling highly-discounted military surplus the year after World War II ended), now has over 300 locations, primarily on the West Coast and in the Pacific Northwest. A fasci- nating story, good free cash flow, and strong growth potential. Black Hills Corp Utilities Diversified iCad Inc Healthcare Health Info Services SPDR® Blackstone / GSO Senior Loan ETF Fixed Income Bank Loans Black Hills Corp (BKH $48-$54-$87) is a mid-cap ($3.8B) diversified utility which pro- vides regulated gas and electric power to states in the Midwest and mountain regions. The firm also runs a mining operation via its Wyodak Resources division. With steady revenue of roughly $1.7 billion annually, the firm had $200 million in net income last year and cash flow of $7.02 per share. BKH has fallen out of favor with hedge funds recently, dragging its share price down from $87 to $48, before the shares rebounded to their current level of $54. With an ultra-low beta of 0.3049 (5Y) and a dividend yield of 4%, the shares are worth a look for income-oriented investors. iCAD Inc (ICAD $10) is a micro-cap ($238M) growth company in the Life Sciences Tools & Services industry. e New Hampshire-based firm, which has been in business since 1984, provides cancer detection and radiation therapy solutions and services. e company offers a range of upgradeable computer aided detection (CAD) solutions for the detection of breast, prostate, and colorectal cancers. Its Xoft Axxent system delivers high dose rate, low energy radiation to target cancer while minimizing exposure to surrounding healthy tissue. Based on its success, the Axxent system is now additionally being deployed for the treatment of non-melanoma skin cancer. Shares of ICAD topped out at $15.31 in March, leading into the pandemic-driven downturn. One of our current favorites in the Penn Strategic Income Portfolio is our senior loan fund, the SPDR Blackstone GSO Senior Loan ETF (SRLN). Senior loans are debt instru- ments issued by a bank to a company to fund any number of projects or to retire existing debt with higher interest rates. Note the term "senior." is means that, in the case of bankruptcy, owners of senior bank loans will be paid first as assets are liquidated—before creditors, preferred shareholders, and stockholders. SRLN currently owns around 220 such senior loans outstanding to companies such as: Bass Pro Shop, Petsmart, Athena Health, and Rackspace Technology. e average maturity of these loans is a comforting 4.72 years, and the beta is 0.0859. Our favorite aspect of the fund in these days of ultra-low rates? It yields 5%. 3 2 1 4

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