Legendary Value Investor Bill Miller’s Portfolio: Top 5 Stock Picks

3. Splunk Inc. (NASDAQ:SPLK)

Miller Value Partners’ Stake Value: $109.2 million

Percentage of Miller Value Partners’ 13F Portfolio: 2.53%

Number of Hedge Fund Holders: 47

Splunk Inc. (NASDAQ:SPLK) is a cloud services provider whose products allow their customers to use large volumes of data for generating insights and managing their affairs. The company is headquartered in San Francisco, California.

Miller Value Partners held 754,847 Splunk Inc. (NASDAQ:SPLK) shares during the third quarter of this year. This stake was worth $109 million and represented 2.53% of its portfolio. 47 of the 867 hedge funds part of Insider Monkey’s research for the same time period owned the company’s shares.

Splunk Inc. (NASDAQ:SPLK)’s largest investor is Brandon Haley’s Holocene Advisors who owns 1.3 million shares worth $196 million.

Splunk Inc. (NASDAQ:SPLK) raked in $665 million in revenue and -$0.37 in non GAAP EPS for its fiscal Q3, beating analyst estimates for both. RBC Capital lowered the company’s price target to $190 from $210 in December 2021, stating that the stock has long-term growth potential.

In its Q2 2021 investor letter, Mr. Miller’s hedge fund had the following to say about Splunk Inc. (NASDAQ:SPLK):

“Our largest new position is Splunk Inc. (SPLK$138.373). Splunk typifies one of our favorite types of opportunities: a company well positioned secularly that is facing short-term business pressures. We believe there’s the opportunity to profit as the business normalizes and then compound capital beyond that. SPLK is a leading provider of security software, a growing market due to exploding cyber threats.

Splunk is in the middle of a multi-year business model transition that has negatively impacted financials and increased uncertainty. We believe we are finally past the worst of the transition with revenues troughing in FY2020. We expect the company to return to positive free cash flow generation in the second half of this year.

SPLK trades at half the multiple of comparables. We believe that gap will close as the market gets more certainty that the transition is working. The stock recently jumped on the announcement that Silver Lake, an excellent tech investor, invested $1B in a convertible senior note and the company announced a $1B repurchase authorization. We believe the stock is worth well more than its old high (~$2204) creating significant upside potential for those patient enough to hold through the transition.”