Like the purist Graham, Miller ignores the fickle moods of the infamous Mr. Market. Like value icon Buffett, Miller looks for franchise value. This is one of the characteristics he likes about Amazon.com. Like John Burr Williams, Miller is willing to forecast when he runs the numbers. At the same time, he believes that numbers arent enough to tell you everything you need to know before dialing up your brokerage firm and placing an order to buy a stock. Like Charlie Munger, Miller looks for investment ideas everywhere.
In 2019 Bill Miller turned in one of the best performances in hedge fund history. His fund, Miller Value Partners, generated a 119.50% return. Thats not a typo. This, of course, crushed any benchmark by orders of magnitude. Its easy to get caught up in recent data, but it wasnt too long ago Millers fund saw declines of over 70% in an 18-month span. Talk about a wild ride.
But at the end of the day, Bill Miller will go down as one of the greatest value investors to have ever live. Bill doesnt call himself a value investor. And its perhaps for that reason why hes so successful. After all, Bill is the only investor to beat the S&P 500 fifteen consecutive years.
The amount of content written, produced and recorded on Miller is astounding. The goal of this piece is to strip everything down. Curate the first principle ideas that make Miller one of value investings sharpest practitioners. Then, provide ideas on how to use such ideas in our own process.
Some of these things arent specific to Millers style. Valuation is standard across the board. But remember, Miller doesnt refer to himself as a value investor. This is why the last two principles make sense (from Millers site, emphasis mine):
Nontraditional: Intellectual curiosity, adaptive thinking and creativity are important parts of our investment process. Our team stays current with numerous nontraditional resources, such as academic and literary journals in the sciences. We have also been involved in the Santa Fe Institute for more than 20 years and recently became involved with the London Mathematical Laboratory. Incorporating nontraditional inputs into our research and process allows us to view businesses and situations from perspectives that others may not.
Flexibility Constraints almost always, by definition, impede solutions to optimization problems. Our strategies are characterized by their unconstrained formats, and each attempts to maximize the long-term risk-adjusted returns for our investors through its primary objective.
The value of any investment is the present value of future free cash flows, so that is ultimately of the most importance to us. Its important to note that growth does not always create value. A company can grow, but if it doesnt earn above the cost of capital, that growth destroys value. In order for growth to create value, a company must earn returns above its cost of capital.
We try to understand the intrinsic value of any business, which is the present value of the future free cash flows. While we use all of the traditional accounting based-valuation metrics, such as ratios of price to earnings, cash flow, free cash flow, book value, private market values, etc, we go well beyond that by trying to assess the long-term free cash flow potential of the business by analyzing such things as its long-term economic model, the quality of the assets, management, and capital allocation record. We also consider a variety of scenarios. Empirically, free cash flow yield is the most useful metric. If a company is earning above its cost of capital, free cash flow yield plus growth is a good rough proxy for expected annual return.
According to Miller, a companys free cash flow yield plus growth provides a guidepost for a stocks expected return. This makes intuitive sense. A company with positive free cash flow and a beaten-down share price would have a high free cash flow yield (FCF/Market Cap). Because the stocks down so far, its expected annual returns (should the company maintain positive FCF) would be its cash flow yield plus any additional business growth.
What would this look like in your investment process? A quick screen of companies that return at least 6% free cash flow yield. Its a large list depending on other variables, but its a Miller-esque starting point.
One of Bill Millers greatest qualities is his refusal to conform to investing labels. Many Miller critics try and poke holes in Millers success. Saying things like, hes not a real value investor. Its these types of comments that make true value investors cringe.
Miller doesnt care if a company trades at 10x P/E or 100x P/E. At the end of the day all he cares about is the future cash flows of the business and if he can buy those future cash flows for less than theyll be worth. He lays it out in the book The Man Who Beats The S&P saying (emphasis mine):
Our definition of value comes directly from the finance textbooks, which define value for any investment as the present value of the future free cash flows of that investment. You will not find value defined in terms of low P/E [price-to-earnings] or low pricetocash flow in the finance literature. What you find is that practicing investors use those metrics as a proxy for potential bargain-priced stocks. Sometimes they are and sometimes they arent.
Heres the important part of this quote: Sometimes they are and sometimes they arent. Metrics like P/E and P/FCF should be guideposts for further research, not the end-all-be-all of investment decision-making.
If you earn above your cost of capital then growth equals value creation. We did a regression of over 200 variables to see what was correlated with AMZNs stock price. And it was gross profit dollars. Makes perfect sense because gross profits after COGs, because all that went to investments where the company would earn well above the cost of capital over the long term. Uses example/comparison of John Malone in the cable biz. The guy never reported a profit over 30yrs but you made 900x your money if you invested with him because he created a lot of value but that doesnt show up in normal GAAP accounting.
Where do we see such non-GAAP centric ideas today? Software-as-a-Service is a big one. But it goes beyond the SaaS circle. Any business that invests capital today to grow tomorrow wont look good under GAAP accounting. Short-term profits are exchanged for long-term shareholder value creation. At whose expense? Mr. Markets short-term bias.
Such companies wont appear in traditional value investing screens. Thats why its important to use metrics like P/E and P/FCF as guides, not absolutes. A perfect example of the dangers of relying on pure quantitative metrics is newspapers. Heres Millers explanation on why buying cheap stocks doesnt always work (emphasis mine):
[Value traps happen] when you get down toward the lower end of these valuations, value people find them attractive. The trap comes in when theres a secular change, where the fundamental economics of the business are changing or the industry is changing, and the market is slowly incorporating that into the stock price. So that would be the case over the last several years with newspapers. They are a good example of where historical valuation metrics arent working.
An investor focused on sticking to MorningStars definition of value wouldnt be able to invest in technology or software companies. Theyd invest in low P/B newspaper-type stocks. Value traps. Miller doesnt care about labels. He cares about the future cash flows of a business. As it should be. Ill leave this section with this quote from Miller:
Growth and value are labels that people use to try to categorize things. If you look at Morningstars investment-style grid, we have migrated through the whole spectrum. Yet this fund has invested the same way for 15 years.
The final characteristic of Millers success is his ability to buy companies at points of low expectations. Maybe its one of those Baader-Meinhof phenomenons, but after reading Expectations Investing by Michael Moubouisson I cant help but see this idea everywhere.
The concept is simple. You buy stocks when the share price implies low expectations of future business performance. If youre thinking about a reverse DCF, youre pretty much there. The goal is to use Mr. Markets price as information about expectations. Does the current stock price imply high or low expectations? What would the company need to do over the next three, five or seven years to justify the current price?
The major commonality among our biggest winners is a starting point of low expectations. A stocks performance depends on fundamentals relative to expectations. For big winners, the gap between how a company actually performs and how its expected to perform is the widest. Our biggest winners tend to be companies that continue to compound value over many years as well, like Amazon.
Lowest average cost wins. Its rare for us to pay up for anything, and its common for us that if the stock goes lower after we buy it and it always does we will buy more of it. If were not buying more of it, then well be selling it, because it doesnt make any sense to hold onto a declining position without putting more money into it or changing the weighting in the portfolio.
If Miller is investing in four companies, three of them might go to zero. But if the fourth went to 6 times its current price, Miller could end up with a 50 percent return, or a total return on his portfolio that would beat the market. In fact, an analysis of Millers portfolio performance would show that he sometimes has a lower frequency of correct picks than other managers do, although his return remains high.
Not only does Miller buy at low expectation prices, he generally holds positions for over five years. Portfolio turnover averages around 20%, much lower than the 100% turnover average for most managers.
Legg Masons Bill Miller calls it time arbitrage. That means looking further out than anybody else does. All of these companies have short-term problems, and potentially some of them have long-term problems. But everyone knows what the problems are.
Markets are discounting machines. The short-term is already embedded in the price of the stock. In other words, the only advantage you have as an investor is an ability to look far enough into the future and see a different outcome than the one Mr. Markets expecting. One way or another it comes back to expectations, as Miller explains:
The securities we typically analyze are those that reflect the behavioral anomalies arising from largely emotional reactions to events. In the broadest sense, those securities reflect low expectations of future value creation, usually arising from either macroeconomic or microeconomic events or fears. Our research efforts are oriented toward determining whether a large gap exists between those low embedded expectations and the likely intrinsic value of the security. The ideal security is one that exhibits what Sir John Templeton referred to as the point of maximum pessimism.
Millers ability to compound capital is nothing short of spectacular. From the valleys of 70% drawdowns to the peaks of 119.50% annual gains. Millers investment style stands the test of time and is one we value investors can learn a great deal from.
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"We had GameStop in our deep-value product, and I think our cost on it was around $4 or something," Miller said in an interview on "The Exchange." "When it got into the $70s is when we sold it, then it of course went to $400."
However, the stock has remained both volatile and in focus as the video game retailer announces steps in its digital transformation. GameStop shares closed down 3.55% on Tuesday to $158.53 apiece, putting the company's market cap at roughly $11.1 billion.
Miller, founder and chief investment officer of Miller Value Partners, said his firm has shied away from GameStop and other so-called meme stocks that are popular with investors who are active on online message forums.
"They're not of interest right now because they're in the grip of the Reddit crowd and you're not able to actually analyze them in the same way you're able to other things because the price is dominating the fundamentals," said Miller, who managed a fund that beat theS&P 500for 15 consecutive years while he worked at Legg Mason.
Miller also told CNBC he remains bullish on bitcoin, saying that demand continues to outpace supply of the world's largest cryptocurrency by market value. "That's all you really need to know, and that means it's going higher," he said.
Bill Miller was on top of the investment world just 5 years ago. Since then his $3.85 Billion Legg Mason Capital Management Value (LMVTX) mutual fund lost nearly 40%, whereas the SPY had a slightly positive return.
There have been 4 great stock market buying opportunities in my lifetime. The coronavirus has given us the 5th. The first was in 1973-74. The Vietnam War was still underway. Then war broke out in the Middle East in October of 1973. Oil prices soared, inflation hit double digits and so did interest rates. The economy went into recession and a constitutional crisis culminated in the resignation of President Nixon. I was a young first lieutenant in the Army making around $400 per month and putting $25 per month into the Templeton Growth Fund. In the fall of 1974, I went into the Merrill Lynch office in Munich, Germany and bought shares near the market bottom. The second was in the summer of 1982. We had started our value strategy in the spring of 1982 and kept it mostly in cash as the market continued a decline that had begun a year earlier. Mexico then defaulted on its debt, the market fell sharply, and we got fully invested in July. In August, Paul Volcker cut rates and the great bull market was underway. The third was in October of 1987 when the market crashed 22.6% on October 19th, nearly twice the previous biggest single day decline in 1929. We had raised cash in the summer, as the market got very expensive relative to bonds. Stocks peaked in August and began to fall. By the end of September, 30-year bonds yielded over 9%, a cash return roughly equal to the average annual return of stocks since 1926. The market collapsed and we put all of our 25% cash position into stocks. Our value strategy was the single best performing fund of 1988 as most others maintained high cash positions due to fears about the health of the economy. The fourth was 2008-09. We did not navigate that period well. The strategies I then managed all went down much more than the market. We made changes to our positions that we thought would provide the best upside in the inevitable recovery. We stayed fully invested throughout the 10-year bull market and Opportunity Equity was one of the best performing of all US equity strategies since the market low in March 2009 through calendar year 2019.
We have been hit about as hard as anyone in this decline because we have been overweight in higher beta names (i.e., those that are more volatile than the S&P 500) believing (correctly) that since the financial crisis people have been risk- and volatility-phobic and that perceived risk has consistently been greater than real risk. Going into 2020, I thought that economic risk was low and that if the market was going to decline it would be because of either geopolitical events or some exogenous shock to global aggregate demand or aggregate supply. We got that exogenous event in the form of a global pandemic that took stocks from all-time highs to a bear market decline of over 30% in the shortest time in history. As is typical in these sorts of egregious declines, we are down a lot more than the market.
In times such as this, I am reminded of what Keynes wrote to his board when he was managing money during the 1937 market collapse. As you may know, in addition to being the most influential economist of the 20th century, Keynes was also an outstanding investor. The board had been urging him to sell as the market went down and he refused. He told them that it was the duty of every serious investor to suffer grievous losses with great equanimity. He went on to note that their advice to increase his selling as stocks went down, if practiced by everyone, would be economically disastrous for the country. It would also mean, he went on to point out, that he would own little or no stock when the market bottomed, whereas his strategy involved being fully invested when stocks were cheap and the market was at its lows.
The markets behavior since the current low of 2191 on March 23 gives a good indication that this recovery from the inevitable recession now underway will follow the pattern of every other recovery since at least 1973-74. The stocks that have led since the bottom have been low PE/cyclical names with operating or financial leverage, viz., the exact names that were clobbered the most in the decline. Those names were also the worst performers when recession fears were high fall of 2018, first six weeks of 2016 yet where no recession materialized. And they gained the most when those fears proved unfounded. The reason why is fairly straightforward: Prices and valuations are highly sensitive to the marginal return on invested capital and to business risk. When the economy is declining, or there are fears that it will, valuations on those companies whose return on invested capital (ROIC) is most sensitive to economic change (mostly traditional cyclicals) will decline more than those that are more resistant such as consumer staples, utilities, bond proxies, and many recurring revenue businesses. Companies with high debt leverage and economic sensitivity fare the worst as the market discounts the possibility they will experience financial distress. When the market sees a recovery, the exact reverse occurs, which is what we saw in the week ending April 10, one of strongest weeks in market history.
It appears that most equity strategists think that the March 23 low may be retested in the coming weeks as the global economic shutdown drags on. If so, last weeks leaders, and our Strategies, will also likely lag, although perhaps not as much as they did during the initial collapse. I am agnostic on that as my ability to forecast the markets short-term path rounds to zero. So does everyone elses, by the way.
Listening to the financial commentators on CNBC and elsewhere, I hear many, if not most, of them advising investors to use the decline to upgrade their portfolios. They say to buy quality names on sale, but avoid or reduce exposure to names that are riskier. Typical issues in the quality bucket include companies such as Alphabet, Disney, Nike, Amazon, Facebook, Procter & Gamble, and Clorox. Now these are all very fine companies and we own several of them. I think, though, that a portfolio comprised of all quality names, names that have been among the best performers in this dramatic decline, will almost certainly be a portfolio that underperforms the market as the economy and the market recover. In big market declines, the prices of stocks fall more rapidly than long-term business values. We try to use these opportunities to upgrade our portfolios as well, by which we mean replace names that have held up reasonably well with those whose price declines now offer much greater long-term upside when the economy comes back.
Sir John Templeton advocated buying at the point of maximum pessimism. The problem is that point is only known in retrospect. There is much pessimism and little optimism evident now, and it is impossible to tell if stocks have declined enough to discount what the future holds with regard to the economic damage that the pandemic will inflict. In October 2008, Warren Buffett wrote an op-ed saying he was buying US stocks and urging others to do so as well. A few years later he was asked how he knew that was the time to buy. He said he did not know the time, but he did know the price at which stocks were a bargain. They were a bargain then and, in my opinion, they are a bargain now, albeit not as great a bargain as they were a few weeks ago. The market may have bottomed at an intraday low of 2191 on March 23 or it may not have. I do believe that shares bought at these prices will prove to be quite rewarding over the next few years, and perhaps a lot sooner. If you missed the other 4 great buying opportunities, the 5th one is now front and center.
The views expressed in this report reflect those of Miller Value Partners portfolio manager(s) as of the date of the report. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.
Below is the current stock portfolio and sector weightings of Bill Miller. This information includes his number of shares, portfolio weight, and the latest value of his stock picks to date. Note: The data presented here are updated every quarter.
Below is the current stock portfolio and sector weightings of Bill Miller. This information includes his number of shares, portfolio weight, and the latest value of his stock picks to date. Note: The data presented here are updated every quarter.
At Miller Value Partners, we think and invest differently. We believe that our best investment opportunities come from a behavioral edge, while other investors look for an informational advantage. We value research from uncommon sources to help us understand the market as a complex adaptive system.
We value businesses by looking at a combination of fundamentals, strategy, peers, management and capital allocation to determine what a business is worth. We then compare our assessment of intrinsic value to the current price and invest when we believe the intrinsic value is significantly higher than the current price. We also translate observable market prices into embedded expectations for specific fundamentals and determine whether those expectations are reasonable.
We believe that investors are increasingly taking a short-term view and trading stocks from quarter to quarter. We focus on factors that are central to long-term performance throughout our process. Investing with a longer time horizon plays a significant role in what we view as our competitive edge.
We look for investment opportunities during periods of uncertainty, typically investing in businesses, industries and sectors that are out of favor with current market sentiment. We think there are three sources of edge in markets informational, analytical and behavioral. The most enduring of these three is behavioral, as humans tend to react emotionally, especially during abnormal and volatile times. As a result, we tend to see the greatest investment opportunities when markets are in a state of panic.
Intellectual curiosity, adaptive thinking and creativity are important parts of our investment process. Our team stays current with numerous nontraditional resources, such as academic and literary journals in the sciences. We have also been involved in the Santa Fe Institute for more than 20 years and recently became involved with the London Mathematical Society. Incorporating nontraditional inputs into our research and process allows us to view businesses and situations from perspectives that others may not.
A fund focused on maximizing long-term returns. Bill Miller and Samantha McLemore use a rigorous valuation-based investment approach to build a portfolio with high active share from the bottom up. Flexibility is key to investing in what we determine are the best risk/return opportunities.
Not your traditional income fund. Flexibility allows Bill Miller and Bill Miller IV to build a portfolio focused on generating income while also preserving the potential for capital gains by investing across capital structures, asset types and geographies.
Mutual fund investing involves risk. Principal loss is possible.An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Funds. Derivatives involve special risks including correlation, counterparty, liquidity, operational, accounting and tax risks. These risks, in certain cases, may be greater than the risks presented by more traditional investments. The Miller Opportunity Trust Fund may also use options, which have the risks of unlimited losses of the underlying holdings due to unanticipated market movements and failure to correctly predict the direction of securities prices, interest rates and currency exchange rates. The investment in options is not suitable for all investors. The Funds may use leverage which may exaggerate the effect of any increase or decrease in the value of portfolio securities or the Net Asset Value of the Funds, and money borrowed will be subject to interest costs. Investments in debt securities typically decrease in value when interest rates rise. The Funds are non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Funds are more exposed to individual stock volatility than a diversified fund. This risk is usually greater for longer-term debt securities. The value approach to investing involves the risk that stocks may remain undervalued. Value stocks may underperform the overall equity market while the market concentrates on growth stocks. The Funds may invest in Illiquid securities which involve the risk that the securities will not be able to be sold at the time or prices desired by the Funds, particularly during times of market turmoil. The Funds invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater in emerging markets. Small- and Medium-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Investing in commodities may subject the Funds to greater risks and volatility as commodity prices may be influenced by a variety of factors including unfavorable weather, environmental factors, and changes in government regulations. Investments in Real Estate Investment Trusts (REITs) involve additional risks such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments. The Funds may make short sales of securities, which involves the risk that losses may exceed the original amount invested. Investing in ETFs are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of the shares may trade at a discount to its net asset value (NAV), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a Funds ability to sell its shares. Investment by the Miller Income Fund in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher-rated securities. Investments by the Miller Income Fund in asset backed and mortgage backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. The Miller Income Fund may invest in MLPs which are subject to certain risks inherent in the structure of MLPs, including complex tax structure risks, the limited ability for election or removal of management, limited voting rights, potential dependence on parent companies or sponsors for revenues to satisfy obligations, and potential conflicts of interest between partners, members and affiliates.
In this article, we will discuss value investor Bill Miller's stock portfolio strategies that helped his hedge fund Miller Value Partners in generating significant gains in the last two years. We will also closely examine how the legendary investor is seeking to beat the market trend in 2021. For that, we will review value investor Bill Miller's top 10 stock picks. Click to skip ahead and see Value Investor Bill Miller's Top 5 Stock Picks.
Bill Miller is an American investor and hedge fund manager, known for his legendary stock-picking strategies and investing perspective. Miller worked for the now-defunct investment management firm Legg Mason famous for beating the S&P 500 for 15 straight years before starting his hedge fund Miller Value Partners. The 71-year-old, born in North Carolina, loves philosophy and pursued a Ph.D. program at Johns Hopkins University Department of Philosophy after completing his military service.
Millers investment philosophy is to brutally scrutinize a stock to gauge its core value, ignoring all kinds of hypes and factors that may add up artificial weight to the stock price. Miller Value Partners loves free cash flows, and analyzes fundamentals, strategy, peers, management and capital allocation to determine the actual worth of a business.
Value investing legend Bill Millers strategy of investing in high growth stocks from information technology, consumer discretionary, and communications sectors worked for his hedge fund Miller Value Partners in the past two years. The firm has generated a 120% return in 2019 and a 35% return in the latest quarter. Bill Miller's portfolio diversification strategies and a keen eye on profit-making opportunities have also helped his hedge fund bounce back after posting a 33% loss in 2018. Miller has spread investments across nine sectors. He believes in buying stocks that are trading at discounts and holding them for longer period of time. His hedge fund values businesses based on their strong fundamentals and competitive advantage instead of PE ratios.
I think the consensus may be wrong is that 2021s economic and profit growth could be considerably higher than is now priced into stocks and bonds, leading some groups that have trailed the market for years, such as banks and energy, to move from laggards to leaders. If growth is stronger than believed, the scarcity value of high growth companies will diminish and the rotation to value continues. This does not mean I think many of 2020s market winners will become losers, rather than the markets gains will be much more broadly distributed than in recent years. Bill Miller said in his Q4 letter to investors.
His predictions are certainly prescient. The 2020 laggards like energy and banking stocks are leading gains this year while 2020 winners like Amazon (NASDAQ: AMZN) and Facebook (NASDAQ: FB) are struggling to trade in green in 2021. The energy sector is up more than 25% since the beginning of this year while the financial sector remains the second-best performer among the 11 S&P 500 sectors.
It also appears that the investing legend has significantly increased his stake in the energy and financial sectors during the past two quarters. The energy sector accounted for 2.72% of the overall 13F portfolio of the hedge fund at the end of the fourth quarter, up from 1.06% at the end of the September quarter. Bill Miller initiated a position in two energy stocks including Diamondback Energy (NYSE: FANG) and Alliance Resource Partners (NYSE: ARLP) and added to his existing Energy Transfer Equity LP (NYSE: ET) position.
Meanwhile, the investing legend looks exceptionally bullish on financial stocks. Financial stocks on his portfolio grew from 12% of the overall portfolio in the second quarter of 2020 to 21% by the end of the year. His hedge fund has initiated positions in several new financial stocks during the past two quarters. These positions include a big stake in Desktop Metal (NYSE: DM) and Rocket Companies (NYSE: RKT).
To capitalize on profit-making opportunities in 2021, value investor Bill Miller has initiated positions in 27 stocks and increased his stake in 29 stocks. On the other hand, his firm sold out 15 stocks during the fourth quarter and most of them were smaller positions.
I think that Bitcoin ... should probably be up 50% to 100% from here in the next 12 to 18 months. And if you were to ask me the over or under, I would definitely say it would be much more likely to be higher than lower.
While Bill Miller's reputation remains intact, the same cant be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldnt keep up with the unhedged returns of the market indices. On the other hand, Insider Monkeys research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. Thats why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
The value investing master Bill Miller has bought more shares of the largest Chines e-commerce giant Alibaba Group Holding Limited (NYSE: BABA) on the dip during the fourth quarter. The 7% shares addition increased Miller Value Partners' overall stake to 394,186 shares valued at around $91.7 million, according to the latest filings. Miller Value Partners has benefited from its Alibaba stake as shares of the Chinese online platform increased more than 200% since the firm first initiated a stake in 2017.
Alibaba (BABA) had quite the quarter rising up to a high of $317 in October only to end the quarter down 20% after the delay of the Ant IPO and the announced investigations by the Chinese government into monopolistic practices at the firm. There was additional pressure on the stock as the US House of Representatives passed a bill that threatens to delist Chinese companies from US exchanges unless US regulators are able to inspect their financial audits within three years. During the quarter, the company increased their share buyback program from $6B to $10B. The company report second quarter FY21 results that were largely in-line with expectations. The company reported revs of Rmb155.1B (USD 23.9B) slightly beating consensus of Rmb 153.9B (USD 23.7B) and adjusted EBITDA of Rmb 47.5B (USD 7.3B) versus 41.3B (USD 6.3B). The company maintained full year guidance for revenues of Rmb 650B (USD 100.3B).
The social media giant Facebook (NASDAQ: FB) has also been a permanent member of value investor Bill Millers portfolio since 2017. Shares of Facebook outperformed the broader market trend in 2020 but the social media giant is struggling to post some gains in 2021. The selloff is blamed on investors' shift towards value stocks from growth stocks.
Kinsman Oak Capital Partners Inc., an independent Toronto-based boutique investment firm, highlighted few stocks including Facebook in an investor letter. Heres what Kinsman Oak Capital Partners stated:
Our view on Facebook (FB) may be somewhat controversial. The bear case for FB boils down to antitrust risk and valuation. Facebook, although to a lesser degree, is a relative value bargain as well. We believe the company possesses an element of platform risk that Alphabet does not but, compared to the rest of the market, the stock still seems undervalued. We compared Facebook to the Russell 2000, an index full of cyclical businesses that are considered no-brainers at the beginning of a recovery and popular re-opening stocks that are poised to go higher after the vaccine is distributed (Appendix E). Facebook is significantly cheaper, growing faster, has a larger economic moat, superior margin profile, and requires less capex.
The security, automation, and smart home solutions provider ADT Inc. (NYSE: ADT) is among the value investor Bill Millers top 10 picks for 2021. After a strong performance in 2020, shares of ADT are underperforming in 2021. Despite that, investors are still likely to benefit from ADTs strong dividends. The company currently offers a dividend yield of almost 1.8%.
ADT Inc. (ADT) declined 3.5% during the quarter. The company reported strong 3Q results, which showed continued net subscriber growth with record customer retention (attrition of 12.9% versus 13.5% last year). The company reported revenue of $1.30B versus consensus of $1.25B with EBITDA of $564M versus $524M expected. The company updated full year guidance to revenue of $5.20-5.35B versus consensus of $5.24B and EBITDA of $2.15-2.225B versus $2.144B expected and free cash flow (FCF) guidance of $650-725M (raising the lower end by $25m from previous guidance). The company has set 2H21 as the time frame to launch their professionally installed and co-branded offering with Google (ahead of the mid-2022 guide) and they announced that they are developing an ADT-owned, next-gen, residential technology platform allowing them to use their own proprietary software.
The financial services holding company OneMain Holdings, Inc. (NYSE: OMF) has been a member of Bill Millers stock portfolio over the past five years. Shares of OneMain Holdings helped the hedge fund in generating robust returns in the past two quarters. This is because shares of OMF rallied almost 60% in the last six months. Besides past performance, OneMain Holdings' stock price is struggling to outperform the broader market trends in 2021.
OneMain Holdings (OMF) was the top contributor over the quarter, advancing 56.0% after reporting Q3 Earnings Per Share (EPS) of $2.19, well above consensus of $1.26 and the quarterly dividend, which was increased 36% to $0.45/share (3.5% annualized yield and 11.5% Trailing Twelve Month (TTM) yield). Net interest income of $836M beat estimates of $778M, implying a 24.3% asset yield and 18.7% net interest margin. Origination volumes increased 41% sequentially to $2.9Bn on continued strength in digital while end-of-period net receivables were flat at $17.8Bn. Credit quality remains excellent with net charge-offs of 5.2%, the lowest level since 3Q 2015. Management guided to year-end receivables of $18.1Bn, net charge-offs of 5.6% (from 5.8%-6.0%), and net leverage of 4.3x-4.5x.
The online seller of apparel, shoes, and accessories Stitch Fix, Inc. (NASDAQ: SFIX) is among the value investor Bill Millers top 10 stock picks for 2021. Shares of Stitch Fix grew 38% so far in 2021, extending the twelve-month gains to 240%. The firm has been holding a position in Stitch Fix since the fourth quarter of 2017.
Stitch Fix, Inc. (SFIX) climbed an impressive 116% in the quarter following the release of their Fiscal Year (FY) 2021 first quarter results. Revenue for the first quarter came in at $490M, beating estimates of $481M. Gross margins were higher than anticipated at 44.7% versus expectations of 43.6% and adjusted net income coming in at $9.54M versus expectations for a -$18.5M decline. The company provided stronger than expected full-year guidance, with revenues of $2.05-$2.14B, relative to $2.01B estimates. Stitch Fix finally announced their new CFO, Dan Jedda, who joins the company from Amazon.com. The company is beginning to see uptake in their direct buy offering which is allowing them to expand their products to customers that are not current Fix members allowing them to expand their total addressable market. The shift to online purchasing has also further supported the companys strong momentum.
The U.S.-listed shares of several Chinese electric-vehicle makers were trading down on Wednesday after the Chinese government imposed restrictions on ride-hailing giant DiDi Global (NYSE: DIDI) following its initial public offering in New York. Li Auto (NASDAQ: LI) was down about 4.6%. NIO (NYSE: NIO) was down about 6.9%.
For the third day in a row, Carnival Corp. (NYSE: CCL) stock is sinking -- down 3% as of 1 p.m. EDT. Consider: As my fellow Fool Travis Hoium explained Tuesday, investors are upset with Carnival's decision to buy back $2 billion worth of its 11.5% senior secured notes due 2023. Now, on the one hand, that move will cut into the $9.3 billion in cash Carnival had on hand to carry it through the rest of the pandemic.
(Bloomberg) -- European stocks fell with Asian equities and U.S. futures amid growing anxiety that the spread of Covid-19 variants will upend growth expectations. Bonds rallied.Contracts on the the S&P 500 and Nasdaq 100 signaled a retreat from new records set Wednesday in the underlying gauges. European stocks tumbled 1% at the open, with every industry sector in the red. Ten-year U.S. Treasury yields continued their descent to the lowest levels since February as U.S. inflation expectations eas
Stock investors are watching the dramatic moves in the Treasury market for clues on the fate of one of this years most successful plays - the so-called reflation trade that helped power shares of economically sensitive companies higher after nearly a decade of underperformance. Investors piled in to shares of energy producers, banks and other companies expected to benefit from a powerful economic rebound earlier this year while betting that Treasury yields, which move inversely to prices, would rise. While stock markets appear placid, with the S&P 500 hovering near a record high, a rotation beneath the surface has accelerated in recent weeks, as investors move out of economically sensitive names and back in to the big technology and growth stocks that led markets higher for most of the last decade.
Workhorse Group (NASDAQ: WKHS) stock opened at $13.85, dropped to a low of $12.43 during the day and closed at $12.51, a one-day tumble of 9.61% on Wednesday. Shares in Workhorse, a maker of electric trucks, have been a favorite among retail investors and were as high as $17 last week. Workhorse, which lost out to Oshkosh Defense, a division of Oshkosh, on the contract to make the next-generation vehicles for the U.S. Postal Service, has lodged a formal complaint with the Federal Claims Court regarding the bid process.
Weve all heard the market clich to buy low and sell high as the key to making money. And if you can pull it off, it works. The key to success, of course, is finding the stocks that are currently trading low but are primed for gains. This implies a profile. Were looking for stocks with a combination of depressed share prices and recent Buy ratings from top analysts. Using TipRanks platform, we identify three stocks that fit. And better yet, their average upside potential for the next year ra
Shares in so-called meme stocks with a following among retail investors lost ground on Wednesday, with AMC Entertainment shares down 8.1%, on track for their fourth straight day of declines, and GameStop Corp falling 4.9%. AMC, which fell almost 12% in the previous three sessions, hit a record high of $72.62 in early June as members of social media platforms including Twitter and Reddit's WallStreetBets urged each other to buy the stock. The cinema operator, which on Tuesday scrapped a shareholder approval request for an increase in the number of shares outstanding, was trading at $45.91 after breaching its 30-day moving average.
What happened Shares of Moderna (NASDAQ: MRNA) were falling 4.7% lower as of 11:55 a.m. EDT on Wednesday. The decline came after the company reported that the first participant has been dosed in a phase 1/2 study evaluating its quadrivalent flu vaccine.
Didi Global Inc fell for the third consecutive session on Wednesday, after China ordered the app removed from mobile app stores as part of a broader crackdown on China-based companies with overseas listings. The Cyberspace Administration of China (CAC) has launched security reviews on Didi and three other internet companies, triggering a broader sell-off in overseas-listed Chinese tech firms.
In fact, the June reading was 20% higher even than the highest the SKEW reached during the U.S. stock markets February-March 2020 waterfall decline. To illustrate, imagine there are two groups of investors: permabears, who more or less permanently think that stock prices are about to fall, and the mainstream consensus, which is bullish. Consider the Crash Confidence Index, a periodic survey introduced in 1989 by Yale University finance professor Robert Shiller.
Say green economy, and what is the first thing you think of? Renewable fuels, electric cars, solar power farms, wind turbines, hydrogen fuel cells, recycling plants these are all components of the green economy. The economic sector is currently small, compared to the US near-$20 trillion annual economic output, but its politically potent and gaining in importance year by year. And as they expand, green industries bring more and more opportunities to investors. Those opportunities, however,