Miller Deep Value Select Strategy Q4 2024 Letter

2025-01-16 11:20:00 ET

Summary

• The equity market's high concentration in top stocks and elevated valuations pose risks, while small caps and low valuation equities present a generational opportunity.
• Miller Deep Value Select Strategy outperformed benchmarks in 2024, focusing on undervalued, underfollowed small and micro-cap equities with significant long-term upside potential.
• Key contributors included Quad Graphics, with strong transformation progress, while detractors like Nabors Industries and Gray Media remain deeply undervalued with promising long-term prospects.
• The strategy emphasizes long-term returns through a concentrated portfolio, identifying turnaround situations and mispriced securities with substantial asset bases and potential for valuation expansion.

Is this a Generational Opportunity?

The equity market last year had a lot of similarities to 2023. The S&P 500 ( SP500 , SPX ) was up more than 20% for the second consecutive year (a rarity, last seen in the 1990s). Momentum and concentration were the common theme for the fourth quarter and 2024 as the top ten stocks in the S&P 500 Index ended the year at another record concentration level: a 38.7% weighting. The “Magnificent 7” continued to lead the market, generating +48% returns last year after posting +76% returns in 2023. As the chart below highlights, their earnings have been supported by profit margins expanding from 15% back to 2021 peak levels of 23.5%....

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