Patient Capital, a recently established independent asset management firm, was previously part of Miller Value Partners. The fund upholds an investment philosophy and methodology initially conceived many years ago by the renowned guru investor Bill Miller during his tenure at Legg Mason. Miller rose to prominence by leading the Legg Mason Value Trust to outperform the S&P 500 annually from 1991 through 2005, one of the longest streaks of outperformance in the mutual fund industry. However, this fund suffered devastating losses during the great financial crisis of 2008-09. Miller stepped down as manager in 2012 and eventually left Legg Mason to go solo and established Miller Value Partners, which went on to produce creditable results following the financial crisis. Samantha McLemore, who joined Miller after graduating from college 20 years ago, working closely with him, assumed the day-to-day management of the Miller Opportunity Trust through her firm, Patient Capital.
McLemore established Patient Capital in 2020. The philosophy and methodology Miller and she cultivated throughout their years at Miller Value Partners continues to evolve under her stewardship. The firm is committed to implementing, refining and enhancing this time-tested growth at a reasonable price approach.
Patient Capital adheres to a long-term, behaviorally-focused strategy rooted in intrinsic value, which has consistently yielded positive results across various market conditions. The firm firmly believes that the paramount factor contributing to investor success is the passage of time, rather than attempts at market timing. McLemore firmly believes the secret to success when it comes to building wealth is time, not timing.
In a recent CNBC interview, McLemore recommended four stocks which exemplify her value and growth at a reasonable price approach. She thinks the current higher interest rate environment favors companies generating high free cash flow yields.
Delta Air Lines
As a premium airline brand, McLemore thinks Delta Air Lines Inc. (DAL, Financial) is very attractive and underappreciated. She said that airlines are not like they were 20 years ago as there has been a lot of consolidation in the industry. The company aslo has has a premium image and pricing power.
She highlighted that Delta has a 15% free cash flow yield and earns "mid-teens" return on capital. She could see the stock going to over $100 in five years.
Source: CIBC Investor's Edge
Wall Street Analysts are bullish on the company with consensus holding that the stock will rise over 57% in 12 months.
One Main Holdings
McLemore highlighted One Main Holdings Inc.'s (OMF, Financial) dividend yield of about 10% is very attractive. While normally such a high dividend yield is a red flag, she thinks the company's earning can cover the dividend in any business environment and even in a recession.
She thinks the stock can double in the next few years while maintaining its dividend. Meanwhile, analysts are generally quite bullish on the stock.
Citigroup
Another stock McLemore likes is Citigroup Inc. (C, Financial), which she thinks is underappreciated, underrecognized and very undervalued. This is a company which has been mismanaged and investors are rightfully skeptical, but now it has new management and the new CEO, Jane Fraser, is making all the right moves.
She mentioned that we can get an over 5% dividend yield right now and Citi's stock trades at about $40 but has a tangible book value of over $80, which should rise to over $100 in a few years. McLemore thinks Citi's return on tangible book value can go to 11% to 12%, which is "not heroic." If this happens, as she expects, the stock price will get much closer to its tangible book value.
Analysts are reasonably bullish on the stock.
Expedia
McLemore thinks Expedia Group Inc. (EXPE, Financial) is more of a tech stock than a just a travel play. The company made major improvements over the course of the pandemic, so she expects the profit margin to improve going forward.
The company has bought back over 8% of its stock. It is a free cash flow machine with a free cash flow yield of over 15%.
Most analysts expect the stock to rise next year.
Conclusion
McLemore is an experienced portfolio manager who has worked closely with Miller. Her investing style is growth at a reasonable price along the lines of Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio). These picks all look interesting and look undervalued. Delta, Expedia and Citigroup are well-known companies. One Main is not well known, but has a high dividend yield.
