Mittleman Brothers recently released its Q2 2020 Investor Letter, a copy of which you can download here. The Mittleman Global Value Equity Fund – Class P advanced 13.0% net of fees (AUD) in the second quarter of 2020, versus a gain of 6.0% in the MSCI ACW Index. You should check out Mittleman Brothers’ top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.
In the said letter, Mittleman Brothers’ highlighted a few stocks and Revlon Inc (NYSE:REV) is one of them. Revlon Inc (NYSE:REV) is a cosmetics, skin care, fragrance, and personal care company. Year-to-date, Revlon Inc (NYSE:REV) stock lost 67.8% and on August 20th it had a closing price of $6.89. Here is what Mittleman Brothers’ said:
“The most impactful detractor from Q2 performance was Revlon (REV). It has been a year since Revlon’s largest shareholder, Ron Perelman, bought more shares in the open market in the low $20s. In August 2019 Goldman Sachs was hired to explore strategic options. If any interest was there, COVID-19 might have chilled it. Still, Revlon’s hair colour products remain #1 in the mass market channel and it still has the #1 lipstick brand in the mass market. Right now however, it is bleeding cash, cutting costs and trying to extend 2021 maturing bonds. Billionaire Ron Perelman (87% shareholder) bailed Revlon out in the early 2000s with loans and equity capital and may be forced to do so again. Yet smaller and more prestige brands could get shaken out in the downturn which should bode well for Revlon moving forward.
MIM believes Revlon will likely sell their hair colour business, their fragrance business or Elizabeth Arden for valuations high enough to facilitate substantial deleveraging of the balance sheet. In the absence of a sale, expect another Perelman back-stopped bailout. MIM has lowered its estimate of fair value again, to $30 which is EV/EBITDA($368M)=13.9x, P/FCF($68M)=23.5x, 2.2x sales ($2.3B).
Finally, Alberta Investment Management Company (AIMCO), the third largest shareholder in Revlon had a change in management. MIM suspects this may have precipitated in AIMCO selling its holdings explaining the increased selling pressure in recent months.”
This isn’t the first time Mittleman Brothers’ talked about Revlon Inc (NYSE:REV) favorably either. The investment firm has been a long time Revlon Inc (NYSE:REV) bull. In June, we shared Mittleman Brothers’ bullish Revlon Inc (NYSE:REV) thesis in this article.
In Q1 2020, the number of bullish hedge fund positions on Revlon Inc (NYSE:REV) stock decreased by about 5% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Revlon’s upside potential. Our calculations showed that Revlon Inc (NYSE:REV) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
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