Miller Value Partners recently released its Q2 2021 Investor Letter, a copy of which you can download here. The Miller Opportunity Trust Class I gained 4.18%, underperforming its benchmark, the S&P 500 Index which returned 8.55% in the same quarter. You should check out Miller Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the Q2 2021 Investor Letter, the fund highlighted a few stocks and Splunk Inc (NASDAQ:SPLK) is one of them. Splunk Inc (NASDAQ:SPLK) is a software company. In the last three months, Splunk Inc (NASDAQ:SPLK) stock gained 6%. Here is what the fund said:
“Our largest new position is Splunk Inc. (SPLK$138.373). Splunk typifies one of our favorite types of opportunities: a company well positioned secularly that is facing short-term business pressures. We believe there’s the opportunity to profit as the business normalizes and then compound capital beyond that. SPLK is a leading provider of security software, a growing market due to exploding cyber threats.
Splunk is in the middle of a multi-year business model transition that has negatively impacted financials and increased uncertainty. We believe we are finally past the worst of the transition with revenues troughing in FY2020. We expect the company to return to positive free cash flow generation in the second half of this year.
SPLK trades at half the multiple of comparables. We believe that gap will close as the market gets more certainty that the transition is working. The stock recently jumped on the announcement that Silver Lake, an excellent tech investor, invested $1B in a convertible senior note and the company announced a $1B repurchase authorization. We believe the stock is worth well more than its old high (~$2204) creating significant upside potential for those patient enough to hold through the transition.”
In Q1 2021, the number of bullish hedge fund positions on Splunk Inc (NASDAQ:SPLK) stock decreased by about 13% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in SPLK’s growth potential. Our calculations showed that Splunk Inc (NASDAQ:SPLK) isn’t ranked among the 30 most popular stocks among hedge funds.
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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.