Miller Value Partners, an investment management company, released its “Income Strategy” third-quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, the strategy returned 1.85% (net of fees) outperforming the ICE BofA US High Yield Index’s 0.54% return and the S&P 500 Index’s -3.27% return. There is a weakness in the global market which is largely tied to rates continuing their parabolic move higher. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Miller Value Income Strategy highlighted stocks like AT&T Inc. (NYSE:T) in the third quarter 2023 investor letter. Headquartered in Dallas, Texas, AT&T Inc. (NYSE:T) is a telecommunications and technology services provider. On October 17, 2023, AT&T Inc. (NYSE:T) stock closed at $14.41 per share. One-month return of AT&T Inc. (NYSE:T) was -6.72%, and its shares lost 6.66% of their value over the last 52 weeks. AT&T Inc. (NYSE:T) has a market capitalization of $104.232 billion.
Miller Value Income Strategy made the following comment about AT&T Inc. (NYSE:T) in its Q3 2023 investor letter:
“Our third-largest holding at quarter end was AT&T Inc. (NYSE:T), a leading provider of communications and connectivity services in the US. At $15/share, the stock trades at the same price it did almost thirty years ago. The share price is much less interesting to us in relation to where it has traded in the past than in relation to how much cash the company generates and what management is doing with it. At just over 6x earnings, the stock trades near its lowest price-to-earnings (P/E) multiple ever, also representing close to its largest-ever P/E discount to the stock market. The business converts most of its earnings to free cash flow, implying a forward free cash flow yield north of 15%. Just under half of free cash flow is going toward the dividend (7.5% yield), while much of the balance is going to debt paydown. In other words, if the stock does not fall below its lowest-ever valuation, investors clip a rock-solid 7.5% in cash, while owning a growing portion of a very steady business as management reduces debt outstanding. A discounted cash flow model will suggest that intrinsic value for shares begins with a “2,” suggesting the stock is undervalued on an absolute basis. The lack of volatility in the underlying fundamentals also makes it unique when compared to many other things we own, which reduces the probability of permanent capital impairment and argues for a significant weight in the portfolio.
AT&T looks particularly attractive when compared to some of the larger names dominating the S&P 500. Compare the stock to Apple, for instance, whose revenues and profits are likely to shrink this year, even as it trades at 29x this year’s earnings estimate. The ongoing return to rationality and capital accountability, along with extreme valuations in the megacap tech stocks, have us more excited about our portfolio’s prospects than we can remember for quite some time. As always, we remain the largest investors and welcome any questions or comments.”
AT&T Inc. (NYSE:T) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held AT&T Inc. (NYSE:T) at the end of second quarter which was 58 in the previous quarter.
We discussed AT&T Inc. (NYSE:T) in another article and shared the list of best October dividend stocks to buy. In addition, please check out our hedge fund investor letters Q3 2023 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.
