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 Gray Television, Inc. (NYSE:GTN) in the second quarter of 2024 investor letter. Gray Television, Inc. (NYSE:GTN) is a television broadcasting company that operates television stations and digital assets. The one-month return of Gray Television, Inc. (NYSE:GTN) was 14.49%, and its shares lost 41.42% of their value over the last 52 weeks. On July 16, 2024, Gray Television, Inc. (NYSE:GTN) stock closed at $5.53 per share with a market capitalization of $582.276 million.
Miller Value Deep Value Strategy stated the following regarding Gray Television, Inc. (NYSE:GTN) in its Q2 2024 investor letter:
“Our two largest detractors during the quarter were Nabors Industries (NBR) and Gray Television, Inc. (NYSE:GTN), whose share prices were down 17% and 16% respectively during the quarter. We think both company’s share prices are at deep discounts to their long-term fundamental value; we have recently increased both holdings.
Gray Television remained under pressure during Q2, with ongoing marketplace concerns on the company debt leverage. Gray has limited maturities over the next 2 years and recently announced an opportunistic debt repurchase program. After a slow start to political advertising due to weaker than expected primaries, we expect to see a nice ramp in political advertising in the back half of the year. Gray’s strong local TV stations, #1 and/or #2 in 89% of their markets, has the company well positioned to achieve $500-700M in high margin political advertising in 2024. In addition, Gray has been outpacing peers in growing their core business over the past couple of years and still appear to be in the early innings of an improvement cycle. Management has recently retrained their salesforce with a greater focus on expanding their high margin digital market share over the next couple of years. In addition, ATSC 3.0 (industry new IP standard), provides opportunity for Gray to stream more content and capture new high margin digital revenue streams overtime. We see the potential for $2.5B of free cash flow generation over the next 5 years that could allow the company to rapidly de-lever their balance sheet and accrue value to the equity holder. With a greater than 80% earnings and free cash flow yield, and an attractive 6.2% dividend yield, we believe patient investors have potential to be rewarded over the coming years.”
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Gray Television, Inc. (NYSE:GTN) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 23 hedge fund portfolios held Gray Television, Inc. (NYSE:GTN) at the end of the first quarter which was 23 in the previous quarter. In the first quarter, Gray Television, Inc. (NYSE:GTN) reported a net income of $75 million or $0.79 per diluted share and adjusted EBITDA of $197 million, up 21% from Q1 2023. While we acknowledge the potential of Gray Television, Inc. (NYSE:GTN) 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 Gray Television, Inc. (NYSE:GTN) and shared the list of best small-cap stocks ready to explode according to analysts. Gray Television, Inc. (NYSE:GTN) hindered the Miller Value Deep Value Strategy’s performance in Q1 2024 as well. 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.
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