Miller Value Partners, an investment management firm, published its “Opportunity Equity” first quarter 2022 investor letter – a copy of which can be downloaded here. Amidst the challenges, Miller Opportunity Equity’s net fees declined 3.57% in the quarter, outperforming its benchmark, the S&P 500’s -4.60% return. The Strategy’s long-term performance remains strong. Since inception annualized returns of 7.87% outpaced the S&P 500’s 7.23% by ~64 basis points annually. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Miller Value Partners Opportunity Equity mentioned Bank of America Corporation (NYSE:BAC) and explained its insights for the company. Founded in 1998, Bank of America Corporation (NYSE:BAC) is a Charlotte, North Carolina-based multinational investment bank and financial services holding company with a $282.5 billion market capitalization. Bank of America Corporation (NYSE:BAC) delivered a -20.95% return since the beginning of the year, while its 12-month returns are down by -16.97%. The stock closed at $35.07 per share on May 13, 2022.
Here is what Miller Value Partners Opportunity Equity has to say about Bank of America Corporation (NYSE:BAC) in its Q1 2022 investor letter:
“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.
A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).
We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”
Our calculations show that Bank of America Corporation (NYSE:BAC) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Bank of America Corporation (NYSE:BAC) was in 84 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 72 funds in the previous quarter. Bank of America Corporation (NYSE:BAC) delivered a -26.61% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Bank of America Corporation (NYSE:BAC) in another article. You can find other 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.
