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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Miller Value Partners Deep Value Strategies 2023 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Miller Value Partners Deep Value Strategies)

Primary Source Intelligence • Q1 2023 Letter Analysis

Miller Value Partners Deep Value Strategies Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Miller Value Partners Deep Value Strategies. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Annualized+22%

Positioning StanceConstructive

GeographyUS

Digest Analysis

Quick Take

"Deep Value strategy down 3.6% as markets crowded into growth amid banking stress. Value and small caps trading at extreme historical discounts with small caps at 0.7x large caps."

Executive Summary

Miller Value Partners' Deep Value strategy declined 3.6% net in Q1 2023, underperforming as markets crowded into longer duration growth equities amid banking stress and recession fears. The manager emphasizes that value and small cap securities are trading at extreme historical discounts, with small caps at 0.7x large caps - only seen once before during the Tech bubble. The portfolio's largest contributor was homebuilder M/I Homes, up over 30%, benefiting from favorable supply/demand dynamics. Key detractors included energy driller Nabors and media company Gannett, both viewed as significantly mispriced with multiple business segments trading at deep discounts to peers. The manager believes current market concentration mirrors 2020, with the most expensive decile up double-digits while the least expensive posted negative returns. Historical analysis suggests value-oriented sectors typically lead markets 4-8 months following Fed tightening pauses. The strategy maintains concentrated positions in mispriced cyclicals and transformation stories, offering over 30% normalized earnings yields at current prices.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

75%

CautiousHigh

High Conviction (75%)

High conviction evident through concentrated portfolio of mispriced cyclicals and detailed analysis of individual holdings. Manager provides specific thesis for each major position including M/I Homes, Nabors, and Gannett. Strategy described as 'highly differentiated' with over 30% normalized earnings yields, indicating strong conviction in current positioning.

Growth Outlook

25%

BearishBullish

Bearish (25%)

Manager acknowledges near-term recession risks and banking stress but maintains constructive long-term view. Expects recession fears to eventually subside and markets to broaden out, benefiting value and small cap securities. Cautiously optimistic about future opportunities despite current headwinds.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

Portfolio remains concentrated in mispriced cyclicals and transformation stories despite recent underperformance. Manager maintains conviction in holdings like Nabors and Gannett despite being detractors. Positioned for eventual market broadening with focus on value and small cap securities.

Capital Deployment

0%

De-riskingDeploying

De-risking (0%)

No specific cash level changes or deployment activity mentioned in the letter. Manager discusses maintaining current positioning in concentrated holdings without indication of significant buying or selling activity during the quarter.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

Manager expects to maintain patient approach, waiting for market broadening and recession fears to subside. Believes value and small caps will see attractive returns in the not-too-distant future. No indication of major portfolio changes or defensive positioning.

Language Signal

35%

BearishBullish

Bearish (35%)

Language balances opportunity-focused terms like 'attractive,' 'mispriced,' and 'favorable' with risk acknowledgment including 'stress,' 'volatility,' and 'recession fears.' Overall tone leans constructive on long-term prospects despite near-term challenges.

Perceived Risk

70%

Low RiskElevated

Elevated Risk (70%)

Manager identifies multiple significant risks including banking system stress, recession probabilities, and rapid rate hikes exceeding historical soft-landing precedents. Discusses market volatility from Silicon Valley Bank failure and concerns about regional bank liquidity issues.

Opportunity Density

75%

ScarceAbundant

Abundant (75%)

Manager sees abundant opportunities in value and small cap securities trading at extreme historical discounts. Describes wide price-to-value gaps and securities discounting significant recession fears as creating attractive long-term opportunities for patient investors.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

Manager emphasizes patient value investing approach with multi-year transformation stories. Discusses long-term supply/demand dynamics for homebuilders and 5-year potential for Nabors' new businesses. Strategy requires 'greater patience and a longer investment time horizon' for thesis realization.