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Apr 04, 2023

Opportunity Equity Update for Week Ended 3/31/23

William Keenan

Alibaba Gains on Six Part Split while S4 Capital Falls on Underwhelming Revenue Guidance

Last week, the Opportunity Equity Strategy's representative account gained 6.73%, outperforming the S&P 500’s 3.50% rise. (Exhibit 1). The strategy ended the week up 10.24% YTD, 274 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 3/31/231
Time Period Opportunity Equity Representative Account S&P 500
Last Week (3/24 - 3/31) 6.73% 3.50%
MTD -4.44% 3.67%
QTD 10.24% 7.50%
YTD 10.24% 7.50%
1 Year -24.05% -7.73%
5 Year 3.47% 11.19%
10 Year 8.58% 12.24%
Inception (annualized since 6/26/00) 6.14% 6.69%

Source: Bloomberg, Miller Value Partners. Visit the Strategy page for Opportunity Equity performance through the most current month end period.

Alibaba Group Holding Limited (BABA) rose through the 50, 100, and 200-day moving averages after announcing it would split into six different companies, with separate corporate governance and capital budgets, each free to pursue an IPO when conditions are favorable. Later in the week, Bloomberg news reported that Cainiao Network Technology Co., the logistics arm of Alibaba Group Holding Ltd., had started preparations with banks for a Hong Kong listing. Mizuho maintained its $155 price target (52% upside).

Mattel, Inc. (MAT) rose above the 50 and 100-day moving averages as filings revealed that management’s severance packages had been amended in the event of a change in control, re-igniting takeover speculation. Bloomberg news previously reported that Apollo Global Management and L Catterton Partners were in preliminary talks for a leveraged buyout last April. Later in the week, DA Davidson published a note discussing a potential merger between Hasbro and Mattel.

Delta Air Lines, Inc. (DAL) rose through the 200-day moving average, while OneMain Holdings Inc. (OMF) and Expedia Group, Inc. (EXPE) rose on limited news.

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 3/24/23 - 3/31/23
Name Type Net Return
Alibaba Group Holding Limited Equity 17.6%
Mattel, Inc. Equity 13.1%
Delta Air Lines, Inc. Equity 10.5%
OneMain Holdings Inc. Equity 8.0%
Expedia Group, Inc. Equity 7.2%

Source: Miller Value Partners. See below for additional information.

The Wall Street Journal reported that in an internal memo to employees, Alphabet Inc. (GOOGL) CFO Ruth Porat signaled additional cost savings initiatives for the company including closing some office cafeterias on low traffic days. Piper Sandler lowered its price target to $117 from $120 (13% upside).

Stitch Fix, Inc. (SFIX) fell on limited news.

S4 Capital PLC (SFOR LN) fell despite reporting 2H FY 2022 results that exceeded expectations but issuing disappointing topline guidance for FY 2023. FY 2022 revenue came in at £892M vs £860M expected, while EBITDA came in at £124M vs £121M expected. EPS came in in-line with consensus expectations at 12p. S4 guided for implied FY 2023 revenues of £998M at the midpoint which fell short of consensus at £1.14B. EBITDA margin guidance of 15.5% at the midpoint implied £155M which was also just short of expectations at £158M. Credit Suisse lowered its price target to £2.80 from £2.84 (70% upside).

Green Thumb Industries Inc. (GTBIF) fell despite a Federal Judge ending an injunction against New York, clearing state regulators to issue Cannabis licenses in all regions except for the Finger Lakes.

Coinbase Global, Inc. (COIN) fell on limited news. Barclays lowered its price target to $70 from $86 (4% upside), while Morningstar lowered its price target from $90 to $80 (18% upside).

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 3/24/23 - 3/31/23
Name Type Net Return
Alphabet Inc. Equity -1.6%
Stitch Fix, Inc. Equity -4.8%
S4 Capital PLC Equity -3.0%
Green Thumb Industries Inc. Equity -2.1%
Coinbase Global, Inc. Equity -0.4%

Source: Miller Value Partners. See below for additional information.

Check out the Income Strategy weekly Update. Click to Read.

As of prior week's market close unless otherwise stated.

1The performance figures for the representative Opportunity Equity account reflect the deduction investment management fees and certain other expenses. Returns greater than 1 year are annualized.

For additional information about Opportunity Equity Strategy performance, please click on the Opportunity Equity Strategy Composite Performance Disclosure. Past performance is no guarantee of future results.

2Significant Contributors and Detractors are based on holdings that had the greatest effect on representative account performance for the week. Holdings that have been in the portfolio since the end of the most recent calendar quarter are identified by name. The net return shown above for each individual security represents the change in market price of the security during the week, according to a third-party pricing service, or for the partial period held in the portfolio during the week.  Net returns also include any purchases or sales that were made during the week. For information on how Contributor/Detractor data were calculated and a list showing the contribution to the Strategy’s weekly performance of each investment held at such quarter end, contact us.

Any views expressed are subject to change at any time, and Miller Value Partners disclaims any responsibility to update such views. There is no guarantee that market trends discussed herein will continue. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued. References to specific securities are for illustrative purposes only. Portfolio composition is shown as of a point in time and is subject to change without notice. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners. 

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