Last week, the Opportunity Equity Strategy's representative account fell -2.83%, underperforming the S&P 500’s -2.05% decline. (Exhibit 1). The strategy ended the week down -35.36% YTD, 1,748 basis points behind the S&P 500.
Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 12/16/221
|Time Period||Opportunity Equity Representative Account||S&P 500|
|Last Week (12/9 - 12/16)||-2.83%||-2.05%|
|Inception (annualized since 6/26/00)||5.81%||6.45%|
Source: Bloomberg, Miller Value Partners. Visit the Strategy page for Opportunity Equity performance through the most current month end period.
Ovintiv Inc. (OVV) and Energy Transfer LP (ET) followed oil prices marginally higher over the course of the week. Morgan Stanley lowered its price target on Ovintiv to $60 from $61 (20% upside), while S&P revised its outlook on Energy Transfer to positive from stable and affirmed its BBB- rating at the issuer level. Energy Transfer announced it had received Federal Energy Regulatory Commission (FERC) approval to open its new Gulf Run pipeline in Louisiana delivering domestically produced natural gas to the Gulf Coast and international markets.
Taylor Morrison Home Corporation (TMHC) rose after Barclays turned bullish on homebuilders, raising its price target to $35 from $30 (13% upside). The sector was up broadly after the Core Consumer Price Index (CPI) rose just 0.2%, the smallest advance in over a year, though still up 6% y/y. Homebuilding competitor Lennar announced Q4 FY22 earnings where the company highlighted its expectation that its 1Q FY 23 gross margin guidance of 21% will mark the low point for the year. In mortgages, Mortgage Bankers Association (MBA) data showed that week-over-week purchase applications rose 4%, while the 4-week moving average rose 1.8%.
Teva Pharmaceutical Industries Limited (TEVA) rose above the 50 and 200-day moving averages. Vanda Pharmaceuticals secured a temporary injunction in the US Federal Circuit Court of Appeals until January 6th, 2023, blocking Teva and Apotex from entering the market with a generic version of its HETLIOZ sleep medication. Earlier in the week, Vanda had lost a lawsuit in Delaware Court that allowed Teva and Apotex to launch generic versions of the drug, known as Tasimelteon, which Teva had received FDA approval for in the same week.
SoFi Technologies, Inc. (SOFI) rose after filings revealed that CEO Anthony Noto purchased 1.1M shares at an average price of $4.42 for a total of $5M. Piper Sandler lowered its price target to $7.50 from $8.50 (62% upside).
Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 12/9/22 - 12/16/22
|Taylor Morrison Home Corporation||Equity||3.4%|
|Teva Pharmaceutical Industries Limited||Equity||2.7%|
|SoFi Technologies, Inc.||Equity||6.9%|
|Energy Transfer LP||Equity||2.1%|
Source: Miller Value Partners. See below for additional information.
United Air Lines Holdings, Inc. (UAL) fell below the 50, 100, and 200-day moving averages after the company announced it would purchase 100 Boeing 787 Dreamliners and 100 737-MAXs for a total of $43B from Boeing. The company reached a tentative agreement with its technicians and mechanics union. Longtime director Edward Shapiro purchased 25,000 shares at $39.79 for $1M in total. Goldman Sachs resumed coverage with a buy rating and $51 price target (33% upside).
OneMain Holdings, Inc. (OMF) fell below the 50 and 100-day moving averages after reporting November trust data that showed a sequential increase in both net charge-offs and delinquencies. Net charge-offs rose +25bps M/M to 4.15%, while delinquencies of 2.15% rose 16bps sequentially, primarily reflecting a +13bps increase in early-stage delinquencies and a +8bps increase in late-stage delinquencies. The data implies a FY22 NCO rate of 6.1%, in-line with management’s guidance and at the low-end of the prior 6.1%-6.5% range.
Ascendiant Capital Markets lowered its price target on Expedia Group, Inc. (EXPE) to $141 from $190 (65% upside). JMP estimated that the company has progressed 56% towards consensus 4Q22 revenue through November, implying the company is pacing below top-line expectations for the period.
Green Thumb Industries Inc. (GTBIF) continued to fall after the SAFE Banking Act, legislation that would allow legal cannabis businesses to work within the US financial system, was left out of the National Defense Authorization Act passed in the US Senate. The company announced key changes to its leadership team, with Anthony Georgiadis named President, Matt Faulkner named CFO, and Bret Kravitz appointed to General Counsel. Green Thumb named Rachel Albert Chief Administrative Officer and Dawn Wilson Barnes to the Board of Directors, all effective January 1st, 2023. Canaccord Genuity highlighted the company as its top pick in the cannabis sector with a $20.83 price target (112% upside).
Silvergate Capital Corporation (SI) continued to fall in sympathy with the broader cryptocurrency market. JP Morgan lowered its price target to $30 from $50 (62% upside), while Wedbush lowered its price target to $30 from $45 (62% upside).
Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 12/9/22 - 12/16/22
|United Air Lines Holdings, Inc.||Equity||-10.6%|
|Expedia Group, Inc.||Equity||-6.3%|
|OneMain Holdings, Inc.||Equity||-6.3%|
|Green Thumb Industries Inc.||Equity||-13.4%|
|Silvergate Capital Corporation||Equity||-13.3%|
Source: Miller Value Partners. See below for additional information.
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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. Returns listed above represent the market performance of the individual security during the week, or for the partial period held in the portfolio 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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