Miller Value Partners, an investment management firm, published its “Miller Deep Value Strategy” fourth quarter 2021 investor letter – a copy of which can be seen here. For the fourth quarter, the Deep Value Strategy was down 8.3%, significantly more than the overall market and the S&P 1500 Value Index. For the year, the Deep Value Strategy was up 57.8%, well ahead of the Value Index and the overall market. 2021 marks the 3rd year in a row that the Strategy has generated investment returns greater than 50%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Miller Value Partners Deep Value Strategy, in its Q4 2021 investor letter, mentioned Gannett Co., Inc. (NYSE: GCI) and discussed its stance on the firm. Gannett Co., Inc. is a McLean, Virginia-based mass media holding company with a $772.8 million market capitalization. GCI delivered a 1.88% return since the beginning of the year, while its 12-month returns are up by 19.34%. The stock closed at $5.43 per share on February 2, 2022.
Here is what Miller Value Partners Deep Value Strategy has to say about Gannett Co., Inc. in its Q4 2021 investor letter:
“During the quarter our two largest detractors (includes) Gannett (GCI), both down more than 20%. Gannett’s transformation plan to transition from an analog to digital media company continues to move forward at an accelerated pace. The company is scaling a Business-to-Business digital marketing services (DMS) platform and Business-to-Consumer platform that should generate attractive reoccurring subscription revenues over the coming years. Success on new growth initiatives could generate more than $2B in revenue at higher-than-average company margins. We believe Gannett’s current share price reflects limited success from the transformation plan, as the company has one of the lowest price-to-sales multiples in the marketplace (currently less than .25x). We see significant long-term upside potential in Gannett’s share price, multiples of the current price level.
During the quarter, company announcements and market transactions further highlight the significant value embedded in one of our current holdings. Conduent (CNDT) recently announced their first non-core asset sale at $340M in cash. What is significant about this transaction is the asset sale was at an Enterprise Value-to-Revenue of more than 4x – a significant premium to Conduent’s overall enterprise value. The company monetized less than 3% of company revenue and generated cash equivalent to nearly 30% of its market capitalization, creating significant long-term accretion to the underlying equity value. Recently, The New York Times announced the acquisition of Athletic for $550M. Athletic has 200 sports journalists and generates annual revenue of approximately $65M (acquisition price greater than 8x revenue!). Gannett’s Sports medium has 500 journalists and generates $90M in revenue. The New York Times acquisition price suggests that Gannett’s sports business (approx. 3% of company revenue) is worth close to the company’s current market capitalization! In addition, Gannett DMS’s segment (approximately 15% of total company revenue) has public peers currently valued at 4-8x revenue that aren’t profitable, implying an embedded value for DMS that is multiples of Gannett’s current equity market capitalization. These are just two examples of the opportunities represented in the portfolio. With the Deep Value Strategy’s price-to-sales at .25x, we believe there is significant embedded asset value in our holdings that is being overlooked by the marketplace.”
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Our calculations show that Gannett Co., Inc. (NYSE: GCI) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. GCI was in 18 hedge fund portfolios at the end of the third quarter of 2021, compared to 18 funds in the previous quarter. Gannett Co., Inc. (NYSE: GCI) delivered a -12.56% return in the past 3 months.
In November 2021, we also shared another hedge fund’s views on GCI in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
