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Sound Shore Management: ‘Flex Ltd. (FLEX) is a Very Attractive Risk Reward Opportunity’

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Sound Shore Management, an investment management firm, published its ‘SSHFX and SSHVX’ fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 21.03% was recorded by the Sound Shore Fund Investor (SSHFX) fund, and 21.08% by the Institutional (SSHVX) class fund in the fourth quarter of 2020, outperforming its Russell 1000 Value Index and S&P 500 benchmark that delivered a 16.25% and 12.15% returns respectively in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Sound Shore Management, in their Q4 2020 investor letter, mentioned Flex Ltd. (NASDAQ: FLEX) and emphasized their views on the company. Flex Ltd. is a Singapore-based global electronics contract manufacturer that currently has a $9.1 billion market capitalization. Since the beginning of the year, FLEX delivered a 2.28% return, impressively extending its 12-month gains to 128.16%. As of March 10, 2021, the stock closed at $17.59 per share.

Here is what Sound Shore Management has to say about Flex Ltd. in their Q4 2020 investor letter:

"Our third quarter addition of contract manufacturer Flex provides a great example. Originally an electronics-focused outsource manufacturer with highly cyclical cash flows and short product lifecycles, the company has evolved its customer base toward the capital goods, automotive and healthcare industries. Having successfully recast itself as a longer-cycle, “new industrial,” Flex’s stock is benefitting from more stable and diversified cash flows and more consistent revenue growth. CEO Revathi Advaithi joined in early 2019 and she has refocused the company by accelerating the transition to these longer-cycle businesses. Moreover, the company has been shareholder oriented, using the company’s ample free cash to reduce shares outstanding by 35% in the last decade. Lastly, Flex’s Nextracker division should provide nice upside. The solar tracking company manufactures motors, software and systems for utility-scale power generation projects and business is growing quickly as the shift toward sustainable energy sources hastens. We believe Nextracker is underappreciated and could represent a significant amount of hidden value. At 13 times earnings Flex is a very attractive risk reward opportunity."

Golubovy/Shutterstock.com

Our calculations show that Flex Ltd. (NASDAQ: FLEX) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Flex Ltd. was in 44 hedge fund portfolios, compared to 27 funds in the third quarter. FLEX delivered an 11.90% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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