Palm Valley Capital Management, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 1.94% was recorded by the fund for the first quarter of 2022, while its benchmarks, the S&P SmallCap 600 Index, by comparison, returned -5.64% and -6.18% return for the Morningstar Small Cap Index over the same period. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Palm Valley Capital Management mentioned Miller Industries, Inc. (NYSE:MLR) and explained its insights for the company. Founded in 1990, Miller Industries, Inc. (NYSE:MLR) is an Ooltewah, Tennessee-based towing and recovery equipment manufacturing company with a $314.7 million market capitalization. Miller Industries, Inc. (NYSE:MLR) delivered a -17.46% return since the beginning of the year, while its 12-month returns are down by -38.69%. The stock closed at $27.57 per share on April 12, 2022.
Here is what Palm Valley Capital Management has to say about Miller Industries, Inc. (NYSE:MLR) in its Q1 2022 investor letter:
“”We acquired three new stocks over the first quarter: (which includes) Miller Industries (ticker: MLR). While many of the companies on our buy list fell in Q1, they were generally declining from lofty levels. The prices did not reach a level where we believed we could meet our required return threshold. Additionally, stocks partially rebounded in the last two weeks of March.
Miller Industries is the world’s largest manufacturer of tow trucks and is based near Chattanooga, Tennessee. Its only major domestic competitor is Jerr-Dan, a division of Oshkosh Corporation. Miller has grown towing equipment revenues at a 10% organic compound annual rate since exiting its towing services operation in 2003. The company invested heavily in modernizing and expanding its U.S. manufacturing facilities, and the firm also sells to European customers. Demand for tow trucks is primarily connected to miles driven of U.S. vehicles and the age of the fleet. Miller’s earnings fell significantly but remained positive during the 2008 recession, when tow truck operators who buy from the company’s distributors found it more difficult to finance purchases. Miller’s stock initially held up well during the COVID pandemic, despite temporary business pressures. The shares peaked at $47 in April 2021 but retreated below $30 in 2022. Tangible book value per share is $24.
While Miller is currently benefiting from record demand, supply chain disruptions and labor shortages have prevented the company from capitalizing. Miller produces the vehicle body but relies on other manufacturers for the chassis that completes a tow truck. The company raised prices four times in 2021. While the firm is still run by the Miller family, their ownership in the business has significantly decreased over the years. As with Heartland Express and Preformed Line Products, Miller Industries is a cyclical small cap business with a solid balance sheet that has endured through multiple business cycles.”
Our calculations show that Miller Industries, Inc. (NYSE:MLR) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Miller Industries, Inc. (NYSE:MLR) was in 11 hedge fund portfolios at the end of the first quarter of 2022, compared to 11 funds in the previous quarter. Miller Industries, Inc. (NYSE:MLR) delivered a -18.98% return in the past 3 months. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
