Miller Value Partners, an investment management company, released its “Deep Value Strategy” second-quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the Deep Value Strategy was down 2% net-of-fees lagging behind the overall market and the S&P 1500 Value Index. Lower valuation and smaller cap stocks trailed the overall equity market from March to May. The firm also witnessed significant valuation compression in its holdings. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Miller Value Deep Value Strategy highlighted stocks like Gray Television, Inc. (NYSE:GTN) in the second quarter 2023 investor letter. Headquartered in Atlanta, Georgia, Gray Television, Inc. (NYSE:GTN) is a television broadcasting company. On July 19, 2023, Gray Television, Inc. (NYSE:GTN) stock closed at $9.44 per share. One-month return of Gray Television, Inc. (NYSE:GTN) was 31.29%, and its shares lost 48.39% of their value over the last 52 weeks. Gray Television, Inc. (NYSE:GTN) has a market capitalization of $901.298 million.
Miller Value Deep Value Strategy made the following comment about Gray Television, Inc. (NYSE:GTN) in its second quarter 2023 investor letter:
“During the quarter, we initiated positions in Western Alliance (WAL) and Gray Television, Inc. (NYSE:GTN). Gray Television is the second largest broadcast company in the U.S., located across the country in 113 markets, reaching 36% of U.S households. The company appears attractively positioned, with 70% of its markets with the #1-ranked local TV stations and another 20% with the second-ranked station. Gray has a good distribution profile, growing its retransmission revenue in the mid-single digits over the past five years. Given their strong local stations, the company leads the industry in political revenue during election cycles. The stock price is down more than 60% from its 52-week high as the marketplace has been concerned about limited political revenue this year along with ongoing fears of a pullback in advertising spending from economic weakness. However, we see the potential for earnings and free cash flow to dramatically improve next year as political advertising reaccelerates and retransmission contracts are expected to renew at favorable rates. In addition, Gray recently spent $200M to develop Assembly, a state-of-the-art Film & TV studio, with 20 sound stages on 43 owned acres in Atlanta. NBC Universal signed a 15-year lease to manage the studio for Gray and will begin filming new TV series and movies in the back half of this year. There are low expectations in Gray’s stock price from the Assembly asset, as no analysts are currently including any future economics in their business projections. We agree with management’s outlook of meaningful free cash flow generation from the Assembly asset upon maturity.
In addition to lifting the long-term free cash flow power of the company, it should also materially reduce the cyclicality in non-election years. While the company has a higher debt load from prior station acquisitions, there are limited maturities over the next couple of years. We see strong free cash flow generation over the next five years (potentially >$2.5B) that could allow the company to rapidly delever over time. With greater than 50% forward earnings and free cash flow yield, Gray’s long-term upside potential is multiples of the current share price.”
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Gray Television, Inc. (NYSE:GTN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held Gray Television, Inc. (NYSE:GTN) at the end of first quarter which was 23 in the previous quarter.
We discussed Gray Television, Inc. (NYSE:GTN) in another article and shared the list of cheap value stocks to buy according to Seth Klarman. In addition, please check out our hedge fund investor letters Q2 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.
