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Legendary Value Investor Bill Miller’s Portfolio: Top 10 Stock Picks

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·10 min read
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In this piece, we will take a look at legendary value investor Bill Miller's portfolio: Top 10 stock picks. If you want to skip our introduction of Mr. Miller and his firm and take a look at only the top five stocks in this list, then head on over to Legendary Value Investor Bill Miller's Portfolio: Top 5 Stock Picks.

Mr. Bill Miller is an American investor with decades of experience in the financial sector. He is the chief investment officer, and chairman of Miller Value Partners, which is a hedge fund based out of Baltimore, Maryland, United States. Mr. Miller is also in charge of his firm's Opportunity Trust fund and the Income Fund.

The hedge fund executive is a native of North Carolina, and he has a degree in Economics from the Washington and Lee University located in Lexington, Virginia. He is also one of the few hedge fund executives with a past career in the United States military, after a stint as a military intelligence officer. Additionally, he was also a Ph.D. candidate at the illustrious John Hopkins university's philosophy program, which he left after deciding that the job prospects for a graduate seemed unfavorable.

This decision seems to have worked out well for Mr. Miller, who has seen his fair share of fame in the investment world. His most well-known achievement came through his previous hedge fund, the Legg Mason Opportunity trust fund, where he started working as a security analyst in 1981 after his time in the military and terminating his doctorate studies. Over the years, Miller would rise in the ranks at Legg Mason to see himself become its chairman and chief investment officer in 2007.

It would be at Legg Mason where Mr. Miller would reach his career's prolific highs. At the fund, he would go on to beat the Standard and Poor's 500-stock index for a whopping fifteen straight years, and he ended his relationship with the firm in 2016, by purchasing its interests in several funds for $2.1 billion to form Miller Value Partners.

The new hedge fund is focused on what is dubbed in the financial world as value investing. This approach, also highlighted in the fund's name, requires conducting an intrinsic evaluation of the company to determine if its stock price is higher or lower than its true value. If it's lower, then the investor buys shares of the undervalued firm with the belief that strong fundamentals will eventually materialize in the public market.

This approach enabled Mr. Miller to take an early stake in the online retailer Amazon.com, Inc. (NASDAQ:AMZN) whose meteoric growth over the previous decades has seen its founder Mr. Jeff Bezos dominate the top place in the list of the world's wealthiest, and made Amazon into a trillion-dollar company.

As far as his fund goes, Miller Value generated a 3.8% return in the second quarter of this year, by the end of which its portfolio stood at a cool $4.1 billion. The portfolio would only slightly grow during this year's third quarter, by the end of which it was valued at $4.3 billion. In addition to Amazon.com, Inc. (NASDAQ:AMZN), the other large holdings in the portfolio cover Alphabet Inc. (NASDAQ:GOOG) and Meta Platforms, Inc. (NASDAQ:FB).

Legendary Value Investor Bill Miller's Portfolio: Top 10 Stock Picks
Legendary Value Investor Bill Miller's Portfolio: Top 10 Stock Picks

Bill Miller of Miller Value Partners

Our Methodology

To pick out Mr. Miller's top ten stock picks, we sifted through Miller Value Partners' 13-F filings with the Securities and Exchange Commission (SEC) for the third quarter of this year.

Legendary Value Investor Bill Miller's Portfolio: Top 10 Stock Picks

10. Alibaba Group Holding Limited (NYSE:BABA)

Miller Value Partners' Stake Value: $93 million

Percentage of Miller Value Partners' 13F Portfolio: 2.17%

Number of Hedge Fund Holders: 115

Alibaba Group Holding Limited (NYSE:BABA) is a Chinese conglomerate that operates one of China's largest electronic commerce platforms. It also has its paws in high-growth technology segments such as cloud computing and artificial intelligence.

Mr. Miller's Miller Value partners owned 632,761 Alibaba Group Holding Limited (NYSE:BABA) shares during the third quarter of this year in a $93 million stake constituting 2.17% of its portfolio. Insider Monkey's research for the same time period revealed that 115 out of 867 hedge funds held a stake in the company.

For its second quarter, Alibaba Group Holding Limited (NYSE:BABA) reported RMB200 billion in revenue and RMB11.20 in non-GAAP EPS, disappointing Wall Street by missing analyst estimates for both. Goldman Sachs reduced the company's price target to $215 from an earlier $252 in November 2021, outlining that the competition in online retailing will impact the Chinese company's growth rate.

Alibaba Group Holding Limited (NYSE:BABA)'s largest investor is Ken Fisher's Fisher Asset Management who owns 14 million shares worth $2 billion.

Artisan Partners mentioned Alibaba Group Holding Limited (NYSE:BABA) in its Q3 2021 investor letter, stating that:

“We also find Alibaba’s valuation compelling despite the prospect of increased regulation. The share price declined 35% during the quarter. Alibaba is China’s largest e-commerce business and is one of the highest return businesses in the world. The company’s core ecommerce operation dominates China’s retail industry. That business continues growing at a low-teens rate and operates with an incredible 62% profit margin. The company also operates several promising new businesses which have been a drag on the bottom line, though the company overall remains highly profitable and cash flow generative. The market cap today is about $440 billion. The company has large investments in cloud, financial services and other businesses worth an estimated $100 billion, leaving the core operations valued at $340 billion. Core operations over the last 12 months generated about $27 billion of after-tax profits, resulting in a trailing P/E of 12.5X. Alibaba certainly faces increased competition and a marginal increase in regulation. As a result, we expect modest growth in earnings over the next few years. However, a company with Alibaba’s operating and financial strength should trade at a premium, rather than a significantly discounted valuation.”

Alongside Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG) and Meta Platforms, Inc. (NASDAQ:FB), Alibaba Group Holding Limited (NYSE:BABA) sneaked its way into Mr. Miller's favorite stocks.

9. Diamondback Energy, Inc. (NASDAQ:FANG)

Miller Value Partners' Stake Value: $94 million

Percentage of Miller Value Partners' 13F Portfolio: 2.18%

Number of Hedge Fund Holders: 51

Diamondback Energy, Inc. (NASDAQ:FANG) is an American natural oil and gas developer that is headquartered in Texas. The company has interests in thousands of wells and has more than a million barrels of proven reserves in the lone star state.

During its fiscal Q3, Diamondback Energy, Inc. (NASDAQ:FANG) raked in $1.9 billion in revenue and $2.94 in non-GAAP EPS, beating analyst estimates for both. Its price target was raised to $150 from $148 by Truist in December 2021 which outlined that the company's stable operations should allow for comfortable growth.

As Q3 2021 came to an end, Miller Value Partners owned 995,316 Diamondback Energy, Inc. (NASDAQ:FANG) shares. These were worth $94 million and represented 2.18% of its portfolio. Of the 867 hedge funds polled by Insider Monkey for Q3 2021, 51 owned the oil company's shares.

Diamondback Energy, Inc. (NASDAQ:FANG)'s largest investor is Natixis Global Asset Management's Harris Associates. It owns 3.2 million shares worth $310 million.

8. Teva Pharmaceutical Industries Limited (NYSE:TEVA)

Miller Value Partners' Stake Value: $94 million

Percentage of Miller Value Partners' 13F Portfolio: 2.2%

Number of Hedge Fund Holders: 22

Teva Pharmaceutical Industries Limited (NYSE:TEVA) is an Israeli pharmaceutical and biopharmaceutical company headquartered in Tel Aviv. Its products cover several health segments, such as cancer, respiratory systems, and the central nervous system.

Miller Asset Management's stake in Teva Pharmaceutical Industries Limited (NYSE:TEVA) equaled $94 million as of the end of this year's third quarter. This was through owning 9.7 million shares. Of the 867 hedge funds part of Insider Monkey's Q3 2021 poll, 22 owned the company's shares.

Teva Pharmaceutical Industries Limited (NYSE:TEVA) earned $3.9 billion in revenue and $0.59 in non-GAAP EPS during its fiscal Q3, missing analyst estimates for both. Raymond James downgraded the company's shares to Market Perform from Outperform in October as it refrained from setting a price target and outlined that its fundamentals were not at par with projections.

Famed Warren Buffett's Berkshire Hathaway is Teva Pharmaceutical Industries Limited (NYSE:TEVA)'s largest investor through a $416 million stake via 42.7 million shares.

7. Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)

Miller Value Partners' Stake Value: $96 million

Percentage of Miller Value Partners' 13F Portfolio: 2.22%

Number of Hedge Fund Holders: 36

Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is an American cruise ship company. Its destinations range from Alaska to Africa to Australia and New Zealand.

Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)'s revenue and non-GAAP EPS for its fiscal Q3 stood at $153 million and -$2.17, respectively, as it missed analyst estimates for both. Stifel kept its $35 price target for the company in November 2021, sharing that recent price weakness represents a buying opportunity.

By the end of this year's third quarter, Mr. Miller's investment firm owned 3.5 million Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) shares which were worth $96 million and represented 2.22% of its portfolio. During the same time period, 36 of the 867 hedge funds polled by Insider Monkey owned a stake in the cruise company.

Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)'s largest investor after Mr. Miller is Richard Merage's MIG Capital who owns 1.8 million shares worth $49 million.

Like Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:FB), Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is a notable stock pick of Bill Miller.

6. ADT Inc. (NYSE:ADT)

Miller Value Partners' Stake Value: $96.8 million

Percentage of Miller Value Partners' 13F Portfolio: 2.24%

Number of Hedge Fund Holders: 18

ADT Inc. (NYSE:ADT) is an American security and home automation services provider that is headquartered in Boca Raton, Florida. The company's products cover video surveillance and fire suppression and detection systems among others.

Mr. Miller's Miller Value Partners owned 11.9 million ADT Inc. (NYSE:ADT) shares during Q3 2021. These were worth $96.8 million and represented 2.24% of its portfolio. During the same time period, 18 of 867 hedge funds owned the company's shares according to Insider Monkey's research.

John W. Rogers's Ariel Investments is ADT Inc. (NYSE:ADT)'s largest investor. It owns a $196 million stake through 24 million shares.

During its fiscal Q3, ADT Inc. (NYSE:ADT) earned $1.32 billion in revenue and -$0.07 in non-GAAP EPS, beating analyst estimates only for revenue. RBC Capital set a $12 price target for the company in July 2021, stating that a partnership with Google and other initiatives will serve the company well.

The largest investor, in its Q2 201 investor letter, mentioned ADT Inc. (NYSE:ADT) and outlined that:

“During the quarter, we initiated a position in ADT, Inc. (ADT) in Ariel Fund and Ariel Appreciation Fund. Buying the same position across both strategies is rare but shows our enthusiasm for the name. Here, we have a 140-year old company that has been in and out of public ownership and as a result, everyone has looked right past it. In our view, ADT’s brand and national presence in the security industry is unmatched, resulting in leading market share, a high recurring revenue base and attractive free cash flow generation. While some are concerned do-it-yourself competition will erode the installation and technology-driven moat around the business, we believe the company is well-positioned to benefit from the secular growth of smart home adoption along with strategic partnerships with companies including Google.”

ADT Inc. (NYSE:ADT) joins Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:FB) in the list of Mr. Miller's favorite stocks.

Click to continue reading and see Legendary Value Investor Bill Miller's Portfolio: Top 5 Stock Picks.

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Disclosure. None. Legendary Value Investor Bill Miller's Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.