Miller Value Partners recently released its Q1 2020 Investor Letter, a copy of which you can download here. You should check out Miller Value Partners top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.
In the said letter, Miller Value Partners spoke about Gamestop Corp. (NYSE:GME) and Bed Bath & Beyond Inc (NASDAQ:BBBY) stocks. Gamestop and Bed Bath & Beyond are retail store companies. Year-to-date, Gamestop Corp. (NYSE:GME) stock lost 23.2% and on June 11th it had a closing price of $4.37. Year-to-date, Bed Bath & Beyond Inc (NASDAQ:BBBY) stock lost 52.9% and on June 11th it had a closing price of $7.46. Here is what Miller Value Partners said:
“Two of our largest detractors during the quarter were GameStop (GME) and BedBath & Beyond (BBBY). Both companies have new management teams that are undertaking turnarounds. In our last quarterly letter, we highlight some of the criteria we have found over the past 20 years that tend to lead to successful turnarounds. The marketplace sometimes forgets that a company is the legal entity that owns the assets and the business. In this instance, the COVID-19 outbreak is disrupting operations in the near-term, however both companies have strong balance sheets/liquidity, have temporarily adjusted their business models to reduce costs, and transitioned to generating revenue through on-line orders and curbside pick-up. In addition, both companies have significant assets that are not being reflected in the current depressed share prices. GameStop ended their fiscal year with nearly $500M in cash (>$7.50/share) and non-core assets (>1M square feet of real estate, corporate jet and Game Informer magazine) which could have considerable value if management decides to monetize these assets. During the past quarter, the business still generated a profit and book value grew sequentially for the first time since 2017 to $9.50/share. With the stock closing the quarter at $3.50, the marketplace is selling the stock based on its near-term view of the business alone. We have been increasing our position size over the past couple of weeks as we see a market price at a significant discount to its long-term fundamental value. BedBath & Beyond which is a little behind GameStop in their turnaround timeline also has a sizable asset base. The company ended their most recent quarter with $11/share in cash, and has significant non-core assets (real estate assets and non-core store banners which could bring more than $2/share in cash and further inventory monetization opportunities). While near-term business will remain challenged, we believe BedBath’s new CEO is focused on the right items to improve future store operations, reduce overall costs and enhance their omni-channel offering. With the stock price closing the quarter near $4/share (>60% discount to tangible book value) we see a growing price-to-value gap with substantial long-term share price upside potential and a significant margin of safety.”
In Q1 2020, the number of bullish hedge fund positions on Bed Bath & Beyond Inc (NASDAQ:BBBY) stock decreased by about 18% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with BBBY’s growth potential. Our calculations showed that Bed Bath & Beyond Inc (NASDAQ:BBBY) and Gamestop Corp. (NYSE:GME) aren’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.
