Miller Value Partners, an investment management firm, published its “Miller Income Strategy” third quarter 2021 investor letter – a copy of which can be seen here. A quarterly return of -2.8% has been recorded by the fund for the third quarter of 2021, versus the 0.9% return of the ICE BofA US High Yield Index for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Miller Value Partners, in its Q3 2021 investor letter, mentioned Vale S.A. (NYSE: VALE) and discussed its stance on the firm. Vale S.A. is a State of Rio de Janeiro, Brazil-based mining company with a $57.6 billion market capitalization. VALE delivered a -29.65% return since the beginning of the year, while its 12-month returns are up by 4.06%. The stock closed at $11.79 per share on November 4, 2021.
Here is what Miller Value Partners has to say about Vale S.A. in its Q3 2021 investor letter:
“Vale (VALE) was the top detractor over the quarter, falling 32.6% in sympathy with iron ore’s 48% decline from record highs on China capacity curbs and growing fears of financial issues within the property sector. Vale reported Q2 EBITDA of $11.24Bn, slightly below consensus of $11.47Bn on higher than expected iron ore cash costs. Free cash flow of $6.5Bn (35% annualized yield) came in well ahead of expectations, driving $2.6Bn of stock buybacks and a 1H21 dividend of $7.6Bn, implying year-to-date (YTD) shareholder returns of roughly $13.8Bn (19% of the current market cap). Management maintained FY21 production guidance for iron ore of 315-335 Metric tons (Mt) and lowered year-end 2022 exit capacity to 370Mt (from 400Mt) due to Northern System licensing delays. Additionally, the company hosted their annual Investor Day, outlining new production initiatives aimed at becoming a key supplier to steelmakers in light of decarbonization goals.”
Image by Tshekiso Tebalo from Pixabay
Based on our calculations, Vale S.A. (NYSE: VALE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. VALE was in 27 hedge fund portfolios at the end of the first half of 2021, compared to 31 funds in the previous quarter. Vale S.A. (NYSE: VALE) delivered a -43.80% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
