U.S. Physical Therapy (USPH) Fell on Reduced Guidance

SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” third quarter 2024 investor letter. A copy of the letter can be downloaded here. As the third quarter of 2024 ends, the firm considers the complex elements that have shaped global markets and influenced its investment strategies. In the third quarter, the strategy returned 10.59% on a gross basis (10.38% net) compared to a 9.27% return for the Russell 2000 Index and 10.15% for the Russell 2000 Value Index. The strategy returned 25.16% on a gross basis (24.22% net) for the trailing twelve months compared to 26.76% and 25.88% respectively for the indexes over the same period. In addition, please check the top 5 holdings of the strategy to know its best pick in 2024.

SouthernSun Small Cap Strategy highlighted stocks like U.S. Physical Therapy, Inc. (NYSE:USPH), in the third quarter 2024 investor letter. U.S. Physical Therapy, Inc. (NYSE:USPH) is an outpatient physical therapy clinic operator. The one-month return of U.S. Physical Therapy, Inc. (NYSE:USPH) was 3.91%, and its shares lost 4.25% of their value over the last 52 weeks. On November 1, 2024, U.S. Physical Therapy, Inc. (NYSE:USPH) stock closed at $81.38 per share with a market capitalization of $1.228 billion.

SouthernSun Small Cap Strategy stated the following regarding U.S. Physical Therapy, Inc. (NYSE:USPH) in its Q3 2024 investor letter:

"U.S. Physical Therapy, Inc. (NYSE:USPH) was the top detractor in the third quarter in the Small Cap strategy. The company reduced guidance, primarily because they are having to spend more on salaries to attract and retain a high-quality workforce. Even though they are continuing to successfully negotiate higher rates with commercial payers, Medicare reimbursements are down again this year. They have now experienced five years of Medicare cuts in a row, in the context of higher inflation. Even with that challenge, we believe management is executing well. They are driving more visits per clinic per day, increasing revenue per visit (even offsetting the mandated Medicare reimbursement cuts), and they have found attractive new businesses to acquire using their best-in-class model for retaining and involving key employees and leaders at the acquired companies. We continue to like USPH’s market position and value proposition in a highly fragmented industry, and we believe that they can continue to grow both their base physical therapy business and their industrial injury prevention (IIP) business. They reported $90 million in cash to put to work in acquiring new practices, and that they expect to earn at least a low teen return on those future investments."

A healthcare professional providing physical therapy to an elderly patient.

U.S. Physical Therapy, Inc. (NYSE:USPH) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held U.S. Physical Therapy, Inc. (NYSE:USPH) at the end of the second quarter which was 10 in the previous quarter. While we acknowledge the potential of U.S. Physical Therapy, Inc. (NYSE:USPH) 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.

In another article, we discussed U.S. Physical Therapy, Inc. (NYSE:USPH) and shared Conestoga Capital Advisors' views on the company. U.S. Physical Therapy, Inc. (NYSE:USPH) detracted from the performance of SouthernSun Small Cap Strategy in the previous quarter due to lower reimbursements from Medicare. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.

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