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Should Value Investors Buy Motorola Solutions (MSI) Stock?

Alex Smith
·4 min read

If you are looking for the best ideas for your portfolio you may want to consider some of Wedgewood Partners top stock picks. Wedgewood Partners, an investment management firm, is bullish on Motorola Solutions Inc. (NYSE:MSI) stock. In its Q4 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Motorola Solutions Inc. (NYSE:MSI) stock. Motorola Solutions Inc. (NYSE:MSI) is a communications equipment company. Unfortunately, the stock is down 18.8% since the Wedgewood Partners pitch in January 2020.

On January 13, 2020, Wedgewood Partners had released its Q4 2019 Investor Letter. Wedgewood said that Motorola Solutions Inc. (NYSE:MSI) was a top detractor to its performance during the fourth quarter of 2019. Motorola Solutions Inc. (NYSE:MSI) stock negatively impacted Wedgewood’s return by 0.14% in the fourth quarter of 2019.

However, Wedgewood sees a value in Motorola Solutions Inc. (NYSE:MSI) and believes that it offers a compelling growth opportunity. The company's sales and earnings are expected to grow in the near future.

For the quarter ended December 31st, 2019, Wedgewood Partners fund recorded a return of 9.57%, compared to 10.62% of Russell 1000 Growth Index and 9.07% of S&P 500 Index. This brings its 2019 full-year return to 31.96%, compared to 36.39% of Russell 1000 Growth Index and 31.49% of S&P 500 Index.

Let’s take a look at comments made by Wedgewood about Motorola Solutions Inc. (NYSE:MSI) in the letter.

"Motorola Solutions reported +7% revenue growth, driven by software and services growth of +12% along with continued margin expansion. Recall that Motorola Solutions’ primary business is providing specialized communication infrastructure, equipment and software to public safety, law enforcement, and increasingly to large corporations. Motorola’s backlog of sales to these customers, which we typically use as a reasonable proxy for future revenue growth, was up +17% overall and up +26% in the higher margin software and services segment. As such, we continue to believe Motorola Solutions has room to accelerate top and bottom-line growth, while the stock continues to exhibit an undemanding, market multiple – rare, in our view, whereby almost any company these days exhibiting double-digit growth commands rich multiples."

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In Q1 2020, the number of bullish hedge fund positions on Motorola Solutions Inc. (NYSE:MSI) stock decreased by about 17% from the previous quarter (see the chart here), so a number of other hedge fund managers don't seem to agree with Motorola's growth potential. Our calculations showed that Motorola Solutions Inc. (NYSE:MSI) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 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. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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