Bill Miller IV, Chairman and Chief Investment Officer of Miller Value Partners, appeared yesterday on CNBC’s “Closing Bell” and talked to Scott Wapner about the current state of the U.S. stock market and investment opportunities. Miller emphasized that despite the market’s recent turbulence, there are numerous investment opportunities available, particularly for value investors.
Investment Opportunities Amid Market Volatility
Miller stated that his firm focuses on identifying expectation gaps between what they believe will happen and what the market’s implied expectations are. He mentioned that there are many sectors and stocks that are highly investable at the moment. However, he expressed skepticism about tech companies that are trading at high multiples, such as 20 to 40 times earnings, especially when there are growing concerns about the economy.
The Role of the Federal Reserve
Miller pointed out that the Federal Reserve has been removing capital from the system, making it more scarce. This has led to a situation where sectors that rely on external financing, like real estate and venture-backed deals, are not performing well. According to Miller, this is a return to normal market conditions after a decade of unusual behavior.
Skepticism About High-Valuation Tech Stocks
When questioned about high-valuation tech stocks like Apple, Miller argued that such companies are trading at multiples that are hard to justify given their growth prospects. He cited Apple as an example of a company that is shrinking yet trading at 28 times earnings, a situation he finds unattractive for investment.
Preference for Underappreciated Stocks
Miller revealed that he is interested in stocks like AT&T, which he believes is trading at a significant discount on a price-to-earnings basis relative to the market. He highlighted AT&T’s 16% free cash flow yield, half of which returns to the investor and the other half is used to pay down debt.
Opinion on Stellantis and the UAW Strike
Miller also mentioned his interest in Stellantis, a company affected by the ongoing UAW strike. He believes the strike will eventually end as both workers and companies need each other. Stellantis, according to Miller, trades at a low valuation and has a management team that is executing well against its goals.
Bond Market Trends
On the topic of the bond market, Miller noted that liquidity measures are starting to dry up, indicating that the market is reaching a breaking point. He expressed hope that the Federal Reserve would shift its tone in the next meeting to either maintain the current rates or cut them, as rates are currently above where inflation readings are coming in.
Miller concluded by saying that bonds are becoming investable again after a period where they were not, and that the system is working as it should, despite the increased volatility.
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