Miller Value Partners, an investment management firm, published its “Deep Value Strategy” first quarter 2022 investor letter – a copy of which can be downloaded here. After a challenging back half of 2021, where the portfolio experienced significant valuation compression, the Deep Value Strategy bounced back and has had a strong start to the year. For the quarter, the Deep Value Strategy was up more than 30%, significantly ahead of the S&P 1500 Value Index and the overall market. 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, Miller Value Partners Deep Value Strategy mentioned Foot Locker, Inc. (NYSE:FL) and explained its insights for the company. Founded in 1974, Foot Locker, Inc. (NYSE:FL) is a New York, New York-based sportswear and footwear retailer with a $2.8 billion market capitalization. Foot Locker, Inc. (NYSE:FL) delivered a -31.77% return since the beginning of the year, while its 12-month returns are down by -53.92%. The stock closed at $29.77 per share on May 13, 2022.
Here is what Miller Value Partners Deep Value Strategy has to say about Foot Locker, Inc. (NYSE:FL) in its Q1 2022 investor letter:
“Finally, Foot Locker (NYSE:FL) came under significant pressure during the quarter, with the stock down more than 50% from its highs and valuation not far from early 2020 lows. Nike continues to place a greater focus on their Direct-to-Consumer business, which will decrease their contribution to Foot Locker’s total sales, retreating to historical averages of 50% by 2023. While a near-term headwind to sales, management plans to offset the lost business by expanding distribution to other leading brands, rolling out larger neighborhood free-standing stores, and expanding two new growth banners (WSS & Atmos). WSS stores will provide an off-mall presence and focus on the rapidly growing and underserved Hispanic market. Atmos will provide Foot Locker with the ability to expand into Japan and Asia sneaker market with their digitally led business model. These new growth concepts have a combined potential to add more than $1B in sales by 2024. The company’s balance sheet remains very strong with $800M in cash and management is increasing returns to shareholders through raising the dividend by 40% and announcing a $1.2B share buyback (more than 40% of the float at current share prices). With the next 12 to 18 months as a transition period for the company, the share price weakness provides attractive reward/risk investment potential, near 3x Enterprise Value/Earnings Before Income, Taxes, Depreciation, and Amortization (EV/EBITDA) and close to a 30% normalized free cash flow yield.”
Mbuso Sydwell Nkosi/Shutterstock.com
Our calculations show that Foot Locker, Inc. (NYSE:FL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Foot Locker, Inc. (NYSE:FL) was in 27 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 30 funds in the previous quarter. Foot Locker, Inc. (NYSE:FL) delivered a -32.11% return in the past 3 months. 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.
