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Is Endo International (ENDP) A Great Investment Choice?

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  • ENDP

Miller Value Partners, an investment management firm, published its “Miller Income Strategy” third quarter 2021 investor letter – a copy of which can be seen here. A quarterly return of -2.8% has been recorded by the fund for the third quarter of 2021, versus the 0.9% return of the ICE BofA US High Yield Index for the same period. 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 Endo International plc (NASDAQ: ENDP) and discussed its stance on the firm. Endo International plc is a Dublin, Ireland-based pharmaceutical company with a $1.3 billion market capitalization. ENDP delivered a 70.00% return since the beginning of the year, while its 12-month returns are up by 131.25%. The stock closed at $4.94 per share on November 4, 2021.

Here is what Miller Value Partners has to say about Endo International plc in its Q3 2021 investor letter:

"Endo International 6.0% unsecured bond due 2028 rose 9.1% during the period. Endo reported Q2 revenue of $714M and earnings before income, taxes, depreciation and amortization (EBITDA) of $343M, topping consensus by 8% and 14%, respectively driven by strength in Branded Pharmaceuticals. Free cash flow of $130M drove a cash balance of $1.55Bn and net debt to $6.7Bn, or Trailing Twelve Month net leverage of 5x. Endo raised the low-end of FY21 guidance, including revenue to $2.73Bn-$2.79Bn (from $2.65Bn-$2.79Bn) and EBITDA of $1.23Bn-$1.28Bn. Additionally, the company announced agreements in principal to settle opioid cases well below market expectations, including Tennessee for $35M, New York for $50M, and Louisiana for $7.5M. Management reiterated their primary goal of achieving a global settlement."

Pharmaceutical, Medicine
Pharmaceutical, Medicine

Photo by Christina Victoria Craft on Unsplash

Based on our calculations, Endo International plc (NASDAQ: ENDP) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ENDP was in 20 hedge fund portfolios at the end of the first half of 2021, compared to 17 funds in the previous quarter. Endo International plc (NASDAQ: ENDP) delivered a 32.00% 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.

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Disclosure: None. This article is originally published at Insider Monkey.