Miller Value Partners, an investment management company, released its “Deep Value Strategy” first-quarter 2024 investor letter. A copy of the letter can be downloaded here. Equity markets continued to perform strongly in early 2024, following a successful 2023. The S&P 500 rose by over 10% in Q1. In the first quarter, Strategy returned 1.78% (net of fees) trailing the S&P 1500 Value Index’s 7.59% return and ahead of the S&P 600 Value Index, which was slightly positive. During the first two months, lower valuation and smaller cap stocks lagged the overall equity market. However, in March they took the lead. The Deep Value Select strategy had a weak performance in January and February, but it outperformed the Value and Small Cap indexes in March. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Miller Value Deep Value Strategy featured stocks like Fossil Group, Inc. (NASDAQ:FOSL) in the first quarter 2024 investor letter. Headquartered in Richardson, Texas, Fossil Group, Inc. (NASDAQ:FOSL) designs, develops, markets, and distributes consumer fashion accessories. On May 1, 2024, Fossil Group, Inc. (NASDAQ:FOSL) stock closed at $0.8019 per share. One-month return of Fossil Group, Inc. (NASDAQ:FOSL) was -13.83%, and its shares lost 73.70% of their value over the last 52 weeks. Fossil Group, Inc. (NASDAQ:FOSL) has a market capitalization of $42.518 million.
Miller Value Deep Value Strategy stated the following regarding Fossil Group, Inc. (NASDAQ:FOSL) in its first quarter 2024 investor letter:
“Our two largest detractors during the quarter were Gray Television (GTN) and Fossil Group, Inc. (NASDAQ:FOSL), whose market share prices both fell between 28 and 30% during the quarter. Both company’s shares are significantly mispriced in our opinion, and we have recently increased our holdings.
Fossil Group (FOSL) is a micro-cap holding that is undertaking a multi-year transformation. The holding has recently underperformed due to near-term revenue headwinds from exiting their connected watch business, closing non-profitable stores and sales weakness from China. We believe management is taking the right action steps as their connected watch gross margins are well below overall company margins. Exiting the business will also allow the company to remove excess working capital and fixed costs which should have long-term positive benefits to free cash flow. With the recent senior management change, the company will also be undertaking a deeper review of the business which has the potential to remove greater fixed costs and further accelerate their transformation program, targeting $300M (25% of revenue) in total savings by the end 2025. Fossil has an underappreciated balance sheet with greater than $2/share in cash and expectations to be free cash flow positive in 2024 as the company expects to collect a $56M U.S. tax refund and monetizes non-core European assets. There are no debt maturities before late 2026, which should provide ample time for the company to further execute on its transformation plan. Fossil appears significantly mispriced at an 80% discount to its tangible book value. Success on the transformation plan should return the company to revenue growth and has potential to generate >$100M in normalized annual free cash flow. We see significant long-term upside potential, and a far higher share price.”
A model sporting a traditional watch, highlighting the timeless elegance of the company’s watch collections.
Fossil Group, Inc. (NASDAQ:FOSL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held Fossil Group, Inc. (NASDAQ:FOSL) at the end of fourth quarter which was 12 in the previous quarter.
We previously discussed Fossil Group, Inc. (NASDAQ:FOSL) in another article, where we shared the list of highest quality affordable watch brands. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
- 25 Most Profitable Companies in the US
- 15 Best Places to Retire in Florida That You’ve Never Heard Of
- 30 Most Fun Cities in the US in 2024
Disclosure: None. This article is originally published at Insider Monkey.
