Bill Miller Portfolio: 12 Picks From Legendary Value Investor

Published on October 24, 2023 at 2:44 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss 12 picks from Bill Miller’s portfolio. If you want to skip our detailed discussion on Miller’s market outlook and investment strategies, head directly to Bill Miller Portfolio: 5 Picks From Legendary Value Investor.

Bill Miller, the CIO and Chairman at Miller Value Partners, observed that the stock market is set for robust performance in the latter half of the year, with diminishing economic concerns leading skeptical investors to align with the optimistic sentiment. In an August 2023 statement, Miller noted that the United States witnessed a prominent decline in inflation, dropping from over 9% the previous summer to approximately 3% in both June and July. Furthermore, there was a 2.4% growth in GDP during the last quarter. Miller believes that this positive economic environment has bolstered expectations that the Federal Reserve may soon reconsider its interest rate hikes, possibly averting an economic recession. He commented:

“It’s entirely possible that we’re going to get back to a 2% inflation rate by the end of this year. If we do without having a recession and with earnings being okay, that would give you a much, much higher justified valuation in the market than we’re at right now.”

Bill Miller said that stocks will surge because even the cautious investors are now buying lots of stocks to remain competitive in the market. He also predicted that MicroStrategy Incorporated (NASDAQ:MSTR), a company involved in business intelligence, software, and cloud-based services with sufficient reserves of Bitcoin, will do very well in the next few years. Miller previously commented that Bitcoin is like an “insurance policy” in case there’s a big financial crisis.

In January this year, Bill Miller announced his decision to short Tesla, Inc. (NASDAQ:TSLA) stock due to the increasing competition in the market. Miller’s primary reason for shorting Tesla was that while the company had boasted a monopoly in the electric vehicle market for over a decade, it is no longer the case. He noted that major automobile manufacturers are shifting their focus to electric vehicles, and Tesla, Inc. (NASDAQ:TSLA) is beginning to lose its dominant position to them. Beyond competition, Miller also questioned whether Tesla should be considered a technology company or a car manufacturer. According to Miller, it falls into the category of a car company, and as a result, he believes that its current valuation is quite inflated.

Miller Value Partners adopts a deep value approach to equities, which is usually intended for long-term investors. It involves identifying and capitalizing on short to mid-term market inefficiencies that temporarily lower a company’s stock price below its long-term intrinsic value. The strategy emphasizes holding investments for at least 3 years. Some of the top picks of Bill Miller as of the second quarter of 2023 include Stellantis N.V. (NYSE:STLA), Viatris Inc. (NASDAQ:VTRS), and Airbnb, Inc. (NASDAQ:ABNB).

Our Methodology

We used Miller Value Partners’ Q2 2023 portfolio and selected the 12 biggest positions during the quarter for this list. We have mentioned Miller Value Partners’ stake value and the hedge fund sentiment towards each stock as of the second quarter of 2023. The list is ranked in the ascending order of the firm’s stake value in each holding.

Bill Miller Portfolio: 12 Picks From Legendary Value Investor

Bill Miller of Miller Value Partners

Bill Miller Portfolio: Picks From Legendary Value Investor

12. Gannett Co., Inc. (NYSE:GCI)

Number of Hedge Fund Holders: 19

Miller Value Partners’ Stake Value: $5,686,594

Gannett Co., Inc. (NYSE:GCI) specializes in media and marketing solutions in the United States. The company is divided into two segments – Gannett Media and Digital Marketing Solutions. In the second quarter of 2023, Miller Value Partners increased its stake in Gannett Co., Inc. (NYSE:GCI) by 9%, holding 2.5 million shares worth $5.6 million.

On September 18, Gannett Co., Inc. (NYSE:GCI) made a payment of around $115 million towards its debt so far this year, and it is still on course to pay off more than $130 million of its debt and lower its first lien net leverage to below 2.0x by the conclusion of 2023.

According to Insider Monkey’s second quarter database, 19 hedge funds were bullish on Gannett Co., Inc. (NYSE:GCI), compared to 17 funds in the prior quarter. Alta Fundamental Advisers held the largest position in the company.

In addition to Stellantis N.V. (NYSE:STLA), Viatris Inc. (NASDAQ:VTRS), and Airbnb, Inc. (NASDAQ:ABNB), Gannett Co., Inc. (NYSE:GCI) is one of the top stock picks of Bill Miller.

Miller Value Deep Value Strategy made the following comment about Gannett Co., Inc. (NYSE:GCI) in its second quarter 2023 investor letter:

“During the quarter, our largest positive contributor was Gannett Co., Inc. (NYSE:GCI), whose share price rose in excess of 20%. Management’s quick action undertaking an aggressive $240M cost reduction program have begun to offset inflationary pressures and stabilize their transformation plan. This point in time for Gannett appears remarkably similar to The New York Times transformation 10 years ago. NY Times’ share price rose 10-fold since then as the company successfully eliminated $1B corporate debt and scaled their digital subscribers to stabilize cash flow generation and return to growth. We believe Gannett potentially has a greater monetization opportunity due to their larger 180M monthly visits to their digital platforms. By further expanding their digital offerings and developing new high[1]margin content partnerships, Gannett appears positioned to return to growth over the next 12-18 months. In addition, Gannett recently announced an antitrust lawsuit against Google which follows similar actions by the European Central Bank (ECB) and various states. Winning the case has the potential to accelerate the transformation, as antitrust cases have treble damages which can award up to three times compensatory damages, potentially leading to a future award well in excess of $1B, versus a current market capitalization of approximately $370M.”

11. Quad/Graphics, Inc. (NYSE:QUAD)

Number of Hedge Fund Holders: 9

Miller Value Partners’ Stake Value: $6,030,946

Quad/Graphics, Inc. (NYSE:QUAD) is a global marketing solutions provider. The company offers different printing services, including publications, catalogs, direct mail, and more. Additionally, they provide marketing services like data analytics, technology solutions, and creative content services. It is one of the top stocks in the Bill Miller portfolio. According to securities filings for Q2 2023, Miller held 1.60 million shares of Quad/Graphics, Inc. (NYSE:QUAD) worth $6 million.

According to Insider Monkey’s second quarter database, Quad/Graphics, Inc. (NYSE:QUAD) was part of 9 hedge fund portfolios, compared to 10 in the prior quarter. D E Shaw held a prominent stake in the company, comprising 313,974 shares worth $1.18 million.

Miller Value Deep Value Strategy made the following comment about Quad/Graphics, Inc. (NYSE:QUAD) in its second quarter 2023 investor letter:

“Our two largest detractors during the quarter were Quad/Graphics, Inc. (NYSE:QUAD) and Nabors Industries (NBR) with share prices down 12.1% and 23.5%, respectively, during the quarter. Shares of both companies are significantly mispriced in our opinion, providing potential long-term upside multiples of their current share prices.

Quad’s transformation from a printing company to a marketing experience company continues to pick-up steam. The company has built out an extensive marketing solutions portfolio that provides not only high-volume print, but content, digital, technology and analytic solutions to their clients. We see significant long-term opportunity as the company further expands its services to the 2,900 large corporate clients. With a market cap near $200M the shares look severely mispriced to us, versus the company’s $3B+ revenue base. Current valuation is extremely attractive at .2x Enterprise to Revenue and 3.5x Enterprise to Earnings Before Income, Taxes, Depreciation, and Amortization (EBITDA). With limited Wall Street coverage, we see significant upside potential as the marketplace becomes more familiar with Quad’s attractive positioning and long-term growth story.”

10. Medical Properties Trust, Inc. (NYSE:MPW)

Number of Hedge Fund Holders: 20

Miller Value Partners’ Stake Value: $6,074,560

Medical Properties Trust, Inc. (NYSE:MPW) is a real estate investment trust established in 2003, primarily focused on acquiring and developing net-leased hospital facilities. It is one of the largest medical REITs in the world. In Q2 2023, Bill Miller owned 656,000 shares of Medical Properties Trust, Inc. (NYSE:MPW) worth $6 million, representing 3.99% of the total 13F securities.

On October 11, Medical Properties Trust, Inc. (NYSE:MPW) sold its four Australian facilities to HMC Capital for approximately A$470 million (US$305 million) at a 5.7% cash cap rate. The company will use the proceeds to pay down its revolving credit facility and increase cash reserves. Additionally, they repurchased $62 million of their 2.550% unsecured notes due in December 2023. Consequently, Medical Properties Trust, Inc. (NYSE:MPW) has around $950 million in immediate liquidity, sufficient to address its upcoming debt maturities for 2023 and 2024. The company also anticipates savings from dividends and the sale of three Connecticut facilities.

According to Insider Monkey’s second quarter database, 20 hedge funds were bullish on Medical Properties Trust, Inc. (NYSE:MPW), compared to 21 funds in the preceding quarter. Dmitry Balyasny’s Balyasny Asset Management is the leading stakeholder of the company, with 7 million shares worth $65.6 million.

Miller Value Partners Income Strategy made the following comment about Medical Properties Trust, Inc. (NYSE:MPW) in its second quarter 2023 investor letter:

“Medical Properties Trust, Inc. (NYSE:MPW) gained after it reported 1Q23 revenues of $350.2MM, -14.5% Y/Y, below consensus of $352.5MM, and Normalized Funds from Operations (FFO)/share of $0.37, -21.3% Y/Y, slightly below consensus of $0.38. The company’s CEO noted “The terms of recently announced transactions including Springstone, the acquisition by CommonSpirit of Steward’s Utah operations, Healthscope, and Prime, have valued our hospital investments near and in excess of our original purchase prices. This confirmation of our underwritten asset values by sophisticated market participants, as well as our existing liquidity and prudently planned debt structure, position us to have no debt maturities until 2025.” The REIT saw a modest uptick in leverage during the quarter, with the company’s Adjusted Net Debt to Annualized Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (EBITDAre) ratio standing at 6.5x as of quarter-end, compared to 6.4x as of 12/31/22. Management maintained its quarterly dividend of $0.29/share, or a 12.5% annualized yield. Management updated full-year 2023 (FY23) guidance for Normalized FFO/share of $1.56 (vs. prior guidance for $1.58), implying a P/FFO multiple of 5.9x, to account for the impact of announced deleveraging asset sales (and expected $1.4B in debt reduction).”

9. B. Riley Financial, Inc. (NASDAQ:RILY)

Number of Hedge Fund Holders: 14

Miller Value Partners’ Stake Value: $6,083,154

Riley Financial, Inc. (NASDAQ:RILY) offers financial services to corporate, institutional, and wealthy individual clients across North America, Australia, and Europe. The company functions through six segments – Capital Markets, Wealth Management, Financial Advisory, Auctions and Asset Liquidation, Communications, and Consumer Services. It is one of the top stocks in Bill Miller’s portfolio. In Q2 2023, Miller owned 132,300 shares of B. Riley Financial, Inc. (NASDAQ:RILY), worth $6 million and representing 4% of the total securities.

On October 10, B. Riley Financial, Inc. (NASDAQ:RILY) declared a $0.4609 per share quarterly dividend, in line with previous. The dividend is payable on October 31, to shareholders of record on October 23. The dividend is specifically for preferred shareholders.

According to Insider Monkey’s second quarter database, 14 hedge funds were long B. Riley Financial, Inc. (NASDAQ:RILY), same as the prior quarter. Chuck Royce’s Royce & Associates is a prominent stakeholder of the company, with 569,232 shares valued at over $26 million.

Miller Value Partners Income Strategy made the following comment about B. Riley Financial, Inc. (NASDAQ:RILY) in its second quarter 2023 investor letter:

“B. Riley Financial, Inc. (NASDAQ:RILY) was the top contributor for the quarter. The company reported 1Q23 operating revenues of $380.5MM, +43.0% year-over-year (Y/Y), and Earnings per Share (EPS) of $0.51, compared to a 1Q22 net loss per share of -$0.43. Operating Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the quarter came in at $80.1MM, or a margin of 21.1%, compared to a margin of 31.6% in 1Q22. The company posted 1Q23 investment gains of $51.6MM, compared to investment losses of -$19.3MM in 1Q22. The company’s Capital Markets segment posted an operating revenue Y/Y gain of 10% driven by a significant increase in interest income from securities lending which helped to offset lower levels of investment banking and equity capital markets activity. The company repurchased $53.7MM worth of shares during the quarter, or 4.2% of the company’s market cap, and maintained its quarterly dividend of $1/share, or an annualized yield of 8.7%. As of quarter-end, B Riley had total debt of $2.51B, and net debt of $426.7MM, compared to $298.7MM as of 12/31/22.”

8. The Buckle, Inc. (NYSE:BKE)

Number of Hedge Fund Holders: 19

Miller Value Partners’ Stake Value: $6,563,620

The Buckle, Inc. (NYSE:BKE) is an American retailer specializing in casual apparel, footwear, and accessories for men and women. The Buckle, Inc. (NYSE:BKE) is one of Bill Miller’s top stock picks. During the second quarter of 2023, Miller held 189,700 shares of the company, valued at $6.56 million and representing 4.31% of the total portfolio.

On October 12, The Buckle, Inc. (NYSE:BKE) declared a quarterly dividend of $0.35 per share, in line with previous. The dividend is payable on October 27, to shareholders of record on October 13.

According to Insider Monkey’s second quarter database, 19 hedge funds were bullish on The Buckle, Inc. (NYSE:BKE), compared to 23 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 297,346 shares worth $10.2 million.

Miller Value Partners made the following comment about The Buckle, Inc. (NYSE:BKE) in its Q4 2022 investor letter:

“The Buckle, Inc. (NYSE:BKE) was the top contributor for the quarter. The company reported 3Q23 net sales of $332.3MM, +4.0% year-over-year (Y/Y), ahead of consensus of $326.7MM, and earnings per share (EPS) of $1.24, -1.6% Y/Y, ahead of analyst expectations for EPS of $1.19. Comparable store sales and online sales increased 3.0% and 8.8% Y/Y, respectively, during the quarter. Inventory rose +49.2% Y/Y and +18.6% sequentially to $152.3MM, as of quarter-end, while gross margin expanded +163bps sequentially to 49.8%. The company also reported that December net sales grew 7.9% Y/Y, bringing fiscal year-to-date (YTD) net sales as of 12/31/22 to $1.28B, or +3.7% Y/Y.”

7. Jackson Financial Inc. (NYSE:JXN)

Number of Hedge Fund Holders: 23

Miller Value Partners’ Stake Value: $6,582,680

Jackson Financial Inc. (NYSE:JXN) offers a range of annuity products to individual investors in the United States. The firm operates through three key segments – Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. Securities filings for the second quarter of 2023 reveal that Bill Miller owned 215,050 shares of Jackson Financial Inc. (NYSE:JXN) worth $6.58 million, representing 4.33% of the total 13F portfolio.

According to Insider Monkey’s second quarter database, 23 hedge funds were bullish on Jackson Financial Inc. (NYSE:JXN), compared to 22 funds in the earlier quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the biggest stakeholder of the company, with 1.38 million shares worth $42.4 million.

Miller Value Partners Income Strategy made the following comment about Jackson Financial Inc. (NYSE:JXN) in its second quarter 2023 investor letter:

“Jackson Financial Inc. (NYSE:JXN) was the top detractor for the quarter. The company reported 1Q23 Adjusted Operating EPS of $3.15, -24.8% Y/Y, below consensus of $3.85. Jackson generated net investment income of $722MM, +4.6% Y/Y, while total net losses on derivatives and investments came in at -$3.4B in the quarter, compared to -$538MM in 1Q22. The company’s total annuity account value decreased -10% Y/Y (+4% sequentially) to $219B as of quarter-end, driven primarily by lower equity markets over the 12-month period. As of quarter-end, the company’s estimated Risk-Based Capital (RBC) ratio was within the company’s target range of 425-500%. Liquidity remains strong for Jackson, as cash and highly liquid securities stood in excess of $1.5B as of quarter-end, significantly above management’s targeted minimum liquidity buffer of 2x annual holding company expenses (currently $250MM). During the quarter, the company returned $124MM to shareholders via $70MM of share repurchases and $54MM in dividends, as the company remains on pace to achieve its 2023 capital return target of $450-550MM, or 19.8% of the company’s market cap at the midpoint.”

6. Western Alliance Bancorporation (NYSE:WAL)

Number of Hedge Fund Holders: 38

Miller Value Partners’ Stake Value: $6,677,985

Western Alliance Bancorporation (NYSE:WAL) serves as the holding company for Western Alliance Bank, delivering a range of banking products and associated services in Arizona, California, and Nevada. In the second quarter of 2023, Bill Miller raised his stake in Western Alliance Bancorporation (NYSE:WAL) by 214%, holding 183,109 shares worth $6.67 million.

On October 19, Western Alliance Bancorporation (NYSE:WAL) reported a Q3 non-GAAP EPS of $2.30 and a revenue of $716.2 million, outperforming Wall Street estimates by $0.39 and $28.43 million, respectively.

According to Insider Monkey’s second quarter database, 38 hedge funds were long Western Alliance Bancorporation (NYSE:WAL), compared to 31 funds in the prior quarter. Davis Capital Partners held the largest stake in the company, comprising 2.5 million shares worth over $91 million.

Like Stellantis N.V. (NYSE:STLA), Viatris Inc. (NASDAQ:VTRS), and Airbnb, Inc. (NASDAQ:ABNB), Western Alliance Bancorporation (NYSE:WAL) is one of the top picks of legendary value investor Bill Miller.

Patient Capital Opportunity Equity Strategy made the following comment about Western Alliance Bancorporation (NYSE:WAL) in its Q2 2023 investor letter:

“We also bought Western Alliance Bancorporation (NYSE:WAL). We initiated the Western Alliance position during the second bank selloff in May. The stock reflected the risk of a bank run. We thought these concerns were overdone since the company published frequent positive deposit updates. We were able to buy the stock at 3-4x earnings believing it should normalize at least back to its April price in the $40s.”

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