Miller Value Partners, an investment management company, released its “Deep Value Strategy” second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The second quarter saw the continuation of the narrow leadership in the equities market, with smaller cap and lower value indices lagging behind the broader market. In contrast, the majority of large-cap indexes had positive gains. In the second quarter, Strategy returned 12.84% (net of fees) well ahead of S&P 1500 Value Index’s -2.25 % return and the S&P 600 Value Index’s -4.85% returns. The strategy returned 15% (net of fees) year to date, compared to 5.17% and -4.72% returns for the indexes. The strategy benefitted from its very high active share in Q2. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Miller Value Deep Value Strategy highlighted stocks like Gannett Co., Inc. (NYSE:GCI), in the second quarter 2024 investor letter. Gannett Co., Inc. (NYSE:GCI) is a media and marketing solutions company. The one-month return of Gannett Co., Inc. (NYSE:GCI) was 13.90%, and its shares gained 83.82% of their value over the last 52 weeks. On July 16, 2024, Gannett Co., Inc. (NYSE:GCI) stock closed at $5.00 per share with a market capitalization of $737.74 million.
Miller Value Deep Value Strategy stated the following regarding Gannett Co., Inc. (NYSE:GCI) in its Q2 2024 investor letter:
“During the quarter, the largest positive contributor was also our largest holding Gannett Co., Inc. (NYSE:GCI), whose share price was up 87%. Gannett had a favorable earnings report highlighting accelerated progress with their long-term transformation to a digital media company. Digital revenues (subscriptions, advertising, media services and partnerships) are expected to have a combined growth rate of 10%+ over the next couple of years as Gannett focuses on monetizing there 187M monthly audience reach. Total digital revenues have increased to 42% of total company revenue; as it approaches 50% of total company revenue, it will be able to fully offset the secular headwinds of the traditional newspaper business returning Gannett to company-wide revenue growth. It’s also worth noting that on a combined basis digital revenues have higher margins and will provide a mix shift benefit to corporate margins and free cash flow generation overtime. New York Times (NYT) went through a similar digital transformation 10 years ago and saw significant revaluation of the company equity. New York Times had a price to sales of .5x and EV/EBITDA under 5x at the beginning of their transformation which has expanded to 3.4x and 19x today. We think Gannett shares remain significantly mispriced at only .25x revenue and >40% normalized free cash flow yield. Gannett free cash flow is expected to have a 40% CAGR growth rate the next couple of years. Along with additional non-core asset sales, the company has the potential for $500M+ of debt reduction to further unlock equity value overtime. In addition, Gannett’s anti-trust suit versus Google is very similar to the DOJ anti-trust suit against the company. With the DOJ case going to trial this fall, a successful outcome could lead to potential future award for Gannett more than $1B, which would accelerate their transformation and accrue significant value to Gannett shareholders. We believe the current share price reflects limited value for long-term successful transformation plan and anti-trust case.”
An editor standing in a newsroom, overseeing the layout of a magazine cover.
Gannett Co., Inc. (NYSE:GCI) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held Gannett Co., Inc. (NYSE:GCI) at the end of the first quarter which was 20 in the previous quarter. While we acknowledge the potential of Gannett Co., Inc. (NYSE:GCI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Gannett Co., Inc. (NYSE:GCI) and shared Bill Miller’s latest stock picks. Gannett Co., Inc. (NYSE:GCI) was one of the top detractors of Miller Value Deep Value Select Strategy in Q4 2023. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
