Zach Miller, CFA, is the Co-Portfolio Manager of the Aquila Three Peaks Opportunity Growth Fund and Director of Research at Three Peaks Capital Management. He details his investment philosophy and top portfolio recommendations in his exclusive interview with the Wall Street Transcript.
Mr. Miller sees management of debt relative to shareholder’s equity as a key indicator for stock market outperformance: “…we also feel like debt paydown is a very sure way of creating value for the equity holders. Each dollar of debt reduction theoretically accretes to a dollar of equity value. This is something we quantify using a metric we call “return on debt paydown,” or RODP, which is the total debt paydown divided by the company’s market cap.”
Zach Miller gives an example of one of his top picks that uses this debt paydown strategy: “Liberty Sirius (NASDAQ:LSXMK), which is the tracking stock for Liberty Media’sinvestment in Sirius XM (NASDAQ:SIRI), has been one of our largest holdings for a while. Sirius XM is really synonymous with satellite radio, as Sirius XM’s equipment now comes pre-installed in about 75% of all new vehicles. The company has done a great job of managing its balance sheet over the years.”
Mr. Miller also highlights “…another name that we feel has exemplified the Three Peaks Opportunity Growth Fund strategy is Ball Corporation (NYSE:BLL), which is the largest beverage-can producer in the world, with about a $15 billion market cap. We really like the company’s very stable cash flows and number one market position in a lot of its end markets.”
To read more in-depth analysis and more top stock picks from Zach Miller, read the entire interview at the Wall Street Transcript.