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Miller Value Partners, an investment management firm, published its ‘Opportunity Equity’ fourth-quarter 2020 Investor Letter – a copy of which can be seen here. A net return of 35.4% was recorded by the fund for the Q4 of 2020, outperforming its S&P 500 benchmark that delivered a 12.15% return. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Miller Value Partners, in their Q4 2020 Investor Letter, said that they sold their positions in Peloton Interactive, Inc. (NASDAQ: PTON) in the fourth quarter of 2020. Peloton Interactive, Inc. is an exercise equipment and media company that currently has a $45.5 billion market cap. For the past 3 months, PTON delivered a decent 53.46% return and settled at $154.67 per share at the closing of February 12th.
Here is what Miller Value Partners has to say about Peloton Interactive, Inc. in their Q4 2020 investor letter:
"We recently exited Peloton because of heightened risk of falling short of elevated expectations, along with our belief that other names offered better opportunities. We bought Peloton in the low $20s right after the IPO believing it was a misunderstood disruptor with a powerful brand that could change the way large numbers of people exercise. We still see significant potential for Peloton to grow the business over the long term.
However, we estimate current market expectations imply Peloton will grow at a slightly greater rate than Apple did from a comparable level of revenue for the next 22 YEARS. Very few companies have a shot at this type of performance. Work by Michael Mauboussin shows companies’ competitive advantage periods (the period over which it can earn excess returns) average 10-15 years. Alternatively, Peloton will need to grow topline 38% annually over the next 10 years to justify the current price, well ahead of Netflix’s 28% topline growth from a comparable revenue level. Not a bet we want to make."
Courtesy of Peloton
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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.