Palm Valley Capital Fund's Strategic Entry into TFX, RHI, LKQ, and AVA: A Deep Dive into Undervalued Industrial and Automotive Plays

In the ever-shifting landscape of industrial and automotive equities, Palm Valley Capital Fund has positioned itself as a discerning capital allocator, targeting undervalued names with near-term catalysts. The fund's third-quarter 2025 investor letter underscored its strategic bets in Teleflex (TFX), Robert Half (RHI), LKQ Corporation (LKQ), and Avista Corporation (AVA), each of which embodies a unique blend of cyclical and structural growth potential. This analysis dissects these positions, evaluating their alignment with the fund's thesis of identifying overlooked sectors poised for re-rating.

Teleflex (TFX): Navigating Earnings Volatility Amid Strong Guidance

Teleflex's Q1 2025 earnings report, which delivered an EPS of $2.91 (exceeding estimates by $0.07), initially signaled resilience. However, the company's FY 2025 guidance of $13.95–$14.35 per share, coupled with revenue projections of $3.0–$3.1 billion, masks near-term headwinds. Analysts now anticipate a 1.8% decline in Q2 2025 EPS to $3.36, despite a 2.9% revenue increase. The Zacks Earnings ESP model's -0.62% deviation from consensus further complicates the outlook (per the same analyst coverage).

Yet, TFX's long-term prospects remain intact. Its dominance in medical device innovation and industrial fluid and gas control systems positions it to benefit from healthcare sector tailwinds and industrial automation trends. For Palm Valley, the key lies in capitalizing on short-term volatility while leveraging TFX's robust revenue guidance as a floor for valuation.

Robert Half (RHI): Dividend Growth and Pipeline Resilience

Robert Half's Q2 2025 results, with an EPS of $0.41 (beating estimates by $0.01), highlight its ability to navigate economic headwinds. Despite a 7% year-over-year revenue decline to $1.37 billion, the company raised its dividend by 11.3% to $0.59 per share, according to Q2 2025 earnings call highlights.

The professional services firm's Protiviti division, however, faces near-term challenges. A decline in revenue was attributed to the completion of large projects, though management emphasized a robust pipeline. For Palm Valley, RHI's dual strengths-dividend growth and a resilient talent pipeline-make it an attractive play in the industrial services sector, where demand for specialized expertise remains elevated.

LKQ Corporation (LKQ): Onshoring and Tariff-Driven Re-rating

LKQ's 21.97% 52-week stock price decline, highlighted in a Yahoo report that Palm Valley added LKQ on a dip, has created a compelling entry point for Palm Valley. As a leading distributor of vehicle parts, LKQ is uniquely positioned to benefit from onshoring trends and U.S. tariff policies, which are reshaping global supply chains. The fund's investor letter noted that while AI stocks might offer a better risk-reward profile, LKQ's undervaluation and exposure to automotive sector tailwinds justify its inclusion.

With a market capitalization of $7.711 billion, LKQ's valuation appears disconnected from its earnings potential. Structural catalysts, such as increased demand for collision repair services and the shift toward electric vehicle (EV) parts, could drive a re-rating. For Palm Valley, the company's low valuation multiples and industry tailwinds present a high-conviction opportunity.

Avista Corporation (AVA): Utility Stability and EV-Driven Synergies

Avista's 5.2% dividend yield and $37.38 stock price on Avista's stock page position it as an attractive utility play, though its earnings performance has been mixed. Q2 2025 results revealed a $0.17 EPS miss, according to Avista's Q2 2025 results, driven by impairments in clean energy investments. However, the core utility operations-electric and natural gas margins-showed resilience, with year-over-year gains of 8.9% and 12.8%, respectively.

While AVA's direct ties to the automotive sector are limited, its partnership with Edo, a provider of EV charging solutions, creates an indirect link to the EV infrastructure boom. Additionally, Avista's $3 billion capital expenditure plan through 2029, outlined in its Q1 2025 slides, including investments in grid modernization and renewable energy, aligns with broader industrial infrastructure trends. For Palm Valley, AVA's stable utility cash flows and exposure to EV-related infrastructure represent a compelling, albeit indirect, automotive sector play.

Conclusion: Balancing Cyclical and Structural Growth

Palm Valley's portfolio of TFX, RHI, LKQ, and AVA reflects a nuanced approach to industrial and automotive investing. While TFX and RHI offer near-term earnings visibility and dividend growth, LKQ and AVA provide exposure to structural trends such as onshoring, EV infrastructure, and utility modernization. The fund's emphasis on undervaluation and catalyst-driven re-ratings underscores its focus on capital preservation and asymmetric risk-reward profiles.

For investors, the key takeaway is clear: the industrial and automotive sectors remain fertile ground for high-conviction, near-term opportunities. By targeting companies with strong fundamentals and aligned with macroeconomic tailwinds, Palm Valley's strategy offers a blueprint for navigating a complex market environment.