Is Uber Technologies (UBER) a Smart Long-term Buy?

Miller Value Partners recently released its Q3 2020 Investor Letter, a copy of which you can download here. The Opportunity Equity Fund posted a return of 13.01% for the quarter (net of fees), outperforming its benchmark, the S&P 500 Index which returned 8.93% in the same quarter. You should check out Miller Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Miller Value Partners highlighted a few stocks and Uber Technologies Inc (NYSE:UBER) is one of them. Uber Technologies Inc (NYSE:UBER) offers vehicles for hire, food delivery, package delivery, couriers, freight transportation, and, through a partnership with Lime, electric bicycle and motorized scooter rental. Year-to-date, Uber Technologies Inc (NYSE:UBER) stock gained 15.4% and on October 30th it had a closing price of $33.41. Here is what Miller Value Partners said:

“We bought UBER this quarter (mix of stock and long term call options). We’ve followed Uber for years but became convinced this quarter that Uber’s improving fundamentals weren’t reflected in the stock. We think CEO Dara Khosrowshahi, who drove significant excess returns when he was at Expedia, has made significant progress improving the culture, competitive positioning, and fundamentals at Uber. Uber owns significant stakes in prior competitors like Didi (Uber of China) and Grab (SE Asia Uber), whose value totals $10-20B. The stock trades in the mid-$30s, below the $45 IPO price in early 2019 and below most of its private valuations for the past 5 years.

We believe Uber’s position as a duopoly in most of its geographies and businesses is underappreciated. Prior to COVID, Uber made excellent progress improving profitability in its Ride’s business. It exited weaker markets and priced more rationally, no longer pursuing growth at any cost. It’s only accelerated its cost rationalization in the downturn. As we normalize, we believe both growth and margins will surprise on the upside. The Delivery business boomed in this COVID environment, scaling even more quickly than the Rides business did. Growth will slow as we recover from COVID but there continues to be significant growth potential. Profit improvement should accelerate. We arrive at a conservative base case valuation in the low $60’s and built our position through both the long term call options and the stock.”


In Q2 2020, the number of bullish hedge fund positions on Uber Technologies Inc (NYSE:UBER) stock decreased by about 3% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in Uber’s growth potential. Our calculations showed that Uber Technologies Inc (NYSE:UBER) is ranked #25 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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Disclosure: None. This article is originally published at Insider Monkey.