Miller Value Partners, an investment management firm, published its “Miller Deep Value Strategy” third quarter 2021 investor letter – a copy of which can be seen here. For the third quarter of 2021, the fund was down in excess of 10%, lagging the overall market and the S&P 1500 Value Index. The Deep Value Strategy remains well ahead of the market for the year, up in excess of 70%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Miller Value Partners, in its Q3 2021 investor letter, mentioned Quad/Graphics, Inc. (NYSE: QUAD) and discussed its stance on the firm. Quad/Graphics, Inc. is a Sussex, Wisconsin-based commercial printing company with a $249 million market capitalization. QUAD delivered a 19.37% return since the beginning of the year, while its 12-month returns are up by 109.17%. The stock closed at $4.56 per share on November 4, 2021.
Here is what Miller Value Partners has to say about Quad/Graphics, Inc. in its Q3 2021 investor letter:
“We did make a new investment this quarter, Quad/Graphics (QUAD). The company has been operating for 50 years and is a leading worldwide marketing solutions provider. While the company built its reputation on providing print marketing products, Quad has developed a larger integrated marketing platform that helps marketers and content creators improve efficiency and effectiveness. Over the years, Quad has used their size and innovation to provide incremental services to their clients and improve their scale and profitability. As the economy continues to recover, management sees an improving sales environment and strong cash flow generation, which should allow the company to accelerate the de-levering of the balance sheet. In addition, a recent transaction also highlights the significant potential value in Quad shares. Chatham Asset Management recently offered $7.50/share to buy the rest of R.R. Donnelley & Sons. The valuation multiple for the transaction, implies that Quad/Graphics could be worth more than $15/share. With the company at a cash flow multiple near 1 times and >70% normalized free cash flow yield we see significant upside potential over the next couple of years, as the company has a market capitalization under $300M and, yet, is generating close to $3B in revenue.”
Photo by Bank Phrom on Unsplash
Based on our calculations, Quad/Graphics, Inc. (NYSE: QUAD) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. QUAD was in 10 hedge fund portfolios at the end of the first half of 2021, compared to 10 funds in the previous quarter. Quad/Graphics, Inc. (NYSE: QUAD) delivered a 6.79% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
