Miller Value Partners, an investment management company, released its “Deep Value Strategy” second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The second quarter saw the continuation of the narrow leadership in the equities market, with smaller cap and lower value indices lagging behind the broader market. In contrast, the majority of large-cap indexes had positive gains. In the second quarter, Strategy returned 12.84% (net of fees) well ahead of S&P 1500 Value Index’s -2.25 % return and the S&P 600 Value Index’s -4.85% returns. The strategy returned 15% (net of fees) year to date, compared to 5.17% and -4.72% returns for the indexes. The strategy benefitted from its very high active share in Q2. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Miller Value Deep Value Strategy highlighted stocks like United Natural Foods, Inc. (NYSE:UNFI) in the second quarter 2024 investor letter. United Natural Foods, Inc. (NYSE:UNFI) distributes natural, organic, specialty, produce, and conventional grocery and non-food products. The one-month return of United Natural Foods, Inc. (NYSE:UNFI) was -1.17%, and its shares lost 33.35% of their value over the last 52 weeks. On July 16, 2024, United Natural Foods, Inc. (NYSE:UNFI) stock closed at $13.51 per share with a market capitalization of $803.441 million.
Miller Value Deep Value Strategy stated the following regarding United Natural Foods, Inc. (NYSE:UNFI) in its Q2 2024 investor letter:
“During the quarter, we initiated a position in United Natural Foods, Inc. (NYSE:UNFI). The nearly 50-year-old company appears to be a significantly mispriced leading national food distribution company. UNFI share price is down nearly 80% from its former high, as the company experienced recent margin pressure from rising inflation and operating inefficiencies. New management has recently joined the company, including Matteo Tarditi, who came from GE where he helped spearhead the company’s successful transformation. UNFI’s transformation plan over the next couple of years will focus on maximizing their market leading position in natural and specialty foods along with supporting the growth of independent retail chains. The company announced it will be rolling out six sigma/lean initiatives to help drive operating efficiencies in their national distribution footprint, which supports >$30B of annual revenue from 30,000 customers in all 50 states and 10 Canadian providences. UNFI is also expanding higher margin services to their customers which have long-term grow potential and should further support the company’s profitability improvement initiatives. As cost efficiencies continue to be realized over the coming years, United Natural Foods has the potential for margins to improve from historical trough levels towards industry peers. With a multi-year transformation there is always risk of short-term disruption to operations as management undertakes new initiatives to improve the company’s long-term profitability. However, we believe UNFI’s extensive distribution network provides a significant margin safety. UNFI own’s 13M square feet of distribution center and warehouses which is a significant “hidden” asset.”
A close-up view of organic fruits and vegetables in a local retail store.
United Natural Foods, Inc. (NYSE:UNFI) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held United Natural Foods, Inc. (NYSE:UNFI) at the end of the first quarter which was 29 in the previous quarter. During the fiscal third quarter of 2024, United Natural Foods, Inc. (NYSE:UNFI) achieved a free cash flow of around $49 million, which enabled the company to lower its net debt by $30 million. While we acknowledge the potential of United Natural Foods, Inc. (NYSE:UNFI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed United Natural Foods, Inc. (NYSE:UNFI) and shared FPA Queens Road Small Cap Value Fund’s views on the company. In addition, please check out our hedge fund investor letters Q2 2024 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.
