Lookback: Miller Value Partners 2019 Tutor Perini Corp (TPC) Thesis
If you are looking for the best ideas for your portfolio you may want to consider some of Miller Value Partners top stock picks. Miller Value Partners, an investment management firm, is bullish on Tutor Perini Corp (NYSE:TPC) stock. In its Deep Value Strategies Q3 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Tutor Perini Corp (NYSE:TPC) stock. Tutor Perini Corp (NYSE:TPC) is a construction company.
On October 24, 2019, Miller Value Partners had released its Deep Value Strategies Q3 2019 investor letter. The investment firm said that it added Tutor Perini Corp (NYSE:TPC) stock to its portfolio in Q3 2019. Tutor Perini Corp (NYSE:TPC) stock has posted a return of -5.0% in the trailing one year period, underperforming the S&P 500 Index which returned 15.4% in the same period. This suggests that the investment firm was wrong in its decision.
Miller Deep Value fund posted a return of -6.4% in the third quarter of 2019, underperforming the S&P 500 Index which returned 1.70% in the same quarter. Let’s take a look at comments made by Miller Value Partners about Tutor Perini Corp (NYSE:TPC) stock in the Q3 2019 investor letter.
"During the quarter, we increased our weighting in Tutor Perini (TPC) in our Deep Value Strategy as the stock price fell below $10 and initiated a position in our Concentrated Strategy. Tutor Perini is a leading global civil, building, and specialty construction company that provides general contracting and design-build services for some of the largest and most complex public/private projects. Tutor Perini share price has been recently under pressure due to a soft patch in business operations as older projects came to completion and new projects start dates were delayed. In our opinion, near-term results are well-below normalized levels, as the company has had great success in winning new contracts, growing its backlog to nearly $11.5B versus their current $4.5B annual revenue run rate. Their civil segment has been the largest beneficiary of new contract wins with greater than $6B in back-log. As the civil segment carries the highest company margins, in excess of 10%, we believe this new business wins with supported normalized earnings in excess of $3/share over the next couple of years. The company also anticipates the resolution of sizable outstanding receivables over the next couple of quarters. With a successful resolution on the outstanding receivables, Tutor Perini has the potential to generate more than $500M in free cash flow by 2021, allowing for significant debt reduction. At the end of the quarter, the company’s valuation multiples approached historical lows, EV/Revenue of .3x and 60% discount to book value. In our opinion, Tutor Perini’s share price looks significantly mispriced, providing a very attractive reward/risk opportunity."
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In Q1 2020, the number of bullish hedge fund positions on Tutor Perini Corp (NYSE:TPC) stock decreased by about 33% from the previous quarter (see the chart here), so a number of other hedge fund managers don't believe in TPC's growth potential. Our calculations showed that Tutor Perini Corp (NYSE:TPC) isn't ranked among the 30 most popular stocks among hedge funds.
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Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.
