We may look to add to our long position of PFHO ($45.00)

For a while, GeoInvesting has been following Pacific Healthcare Organization. Our very first mention of PFHO was 3/19/12, when we added it to our Tier 1 Pink screen. It was trading at just $1.81 at the time. We listed it as one of our “On the Radar” GeoBargain picks on 4/2/2012, and since then the company’s stock has gone from $5 to highs of over $70, before pulling back to $44. We disclosed our long position to our GeoInvesting Premium Members on 5/16/2012 at $3.77.  The current price gives the company a ttm P/E ratio of about 15x, which we believe to be modest due to how quickly the company has been growing.

Much of this selling, we believe, was done as a result of new California legislation surrounding PEOs and a short report put out by Copperfield Research on BBSI who operate in a similar, but not exactly the same type of business. From our internal analysis, we conclude that PFHO will not be affected by the new California legislation, and that the company’s recent public outreach to hire more employees indicates to us that this company could potentially be undervalued at these levels. If anything, we expect said legislation to be a positive for PFHO, as they manage provider networks for workman’s comp claims and the new legislation ensures that all temp employees in California are now provided with workman’s comp.

We will look, as we usually do, to see if CEO Tom Kubota adds shares at this levels as well. We remain long and are considering adding.  (This note was first made available on our premium message boards on Friday, 10/24/2014 during the trading day.)