Opportunity Equity Strategy Update for 7/21/2023 - 7/28/2023

Alphabet and Meta Rise on Earnings while S4 Declines on Lowered Guidance

Last week, the Opportunity Equity Strategy's representative account gained 0.50%, underperforming the S&P 500’s 1.03% rise. (Exhibit 1). The strategy ended the week up 33.06% YTD, 1,259 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 7/28/23¹

Time Period	Opportunity Equity Representative Account	S&P 500
Last Week (7/21 - 7/28)	0.50%	1.03%
MTD	6.11%	3.06%
QTD	6.11%	3.06%
YTD	33.06%	20.47%
1 Year	18.36%	14.46%
5 Year	3.86%	12.14%
10 Year	8.95%	12.61%
Inception (annualized since 6/26/00)	6.92%	7.12%

Alphabet Inc. (GOOGL) rose above its 50-day moving average after the company reported 2Q 2023 revenue of $62.1B beating expectations for $60.3B. Adjusted operating income came in at $21.8B vs expectations for $19.9B leading to in-line EPS of $1.44. Evercore ISI raised its price target to $160 from $130 (21% upside), while RBC raised its price target to $155 from $145 (17% upside).

Meta Platforms, Inc. (META) rose after reporting strong 2Q 2023 results while lowering 2023 CapEx guidance. Revenue of $32.0B came in ahead of consensus estimates at $31.1B, while monthly active users (MAUs) of 3.03B were in-line, and average revenue per user (ARPU) of $10.63 was ahead of consensus at $10.36. EPS of $2.98 exceeded expectations of $2.92. The company guided for Q3 revenue of $32B-$34.5B, ahead of the street at $31.2B reflecting a 3% FX tailwind. FY23 expense guidance was raised to $88B-$91B (from $86B-$90B) and CapEx guidance of $27B-$30B was lowered from $30B-$33B. Truist raised its price target to $390 from $340 (20% upside), while RBC raised its price target to $400 from $330 (23% upside).

Alibaba Group Holding Limited (BABA) rose with the broader Chinese market after the Communist Party’s Politburo signaled more support for the country’s troubled real estate sector.

Ovintiv Inc. (OVV) rose above the 200-day moving average after reporting 2Q earnings that exceeded consensus expectations. Total production of 573mboe/d came in above consensus of 529mboe/d leading to a revenue beat at $2.5B vs $2.0B expected. EBITDA came in at $812M vs. $726M expected, while EPS of $0.93 was slightly ahead of consensus at $0.90. Capital spending of $640M was lower than expected at $684M. Cash flow per share of $2.79 beat consensus of $2.68. The company guided for FY23 total production of 535-550mboe/d up from 521-546mboe/d previously. CAPEX guidance was narrowed to $2.68B-$2.85B from $2.68B to $2.98B, in-line with consensus. Citi raised its price target to $48 from $40 (6% upside), while Truist raised its price target to $54 from $52 (20% upside).

UBS Group AG (UBS) rose after the bank agreed to a $390M settlement with United States and United Kingdom regulators related to Credit Suisse’s involvement in the collapse of hedge fund Archegos Capital Management.

Exhibit 2: Significant² Contributors to Opportunity Equity Representative Account Performance, 7/21/23 - 7/28/23

Name	Type	Net Return
Alphabet Inc.	Equity	10.5%
Meta Platforms, Inc.	Equity	10.6%
Alibaba Group Holding Ltd.	Equity	9.1%
Ovintiv Inc.	Equity	6.9%
UBS Group AG	Equity	4.6%

S4 Capital PLC (SFOR.LN) fell through the 50-day moving average after the company issued an unscheduled trading update where it lowered full year guidance. S4 now expects revenue growth of 2-4% vs. 6-10% previously, and EBITDA margins of 15% at the midpoint, down from 15.5% previously. Credit Suisse lowered its price target to 220pp from 280pp (107% upside), while S&P affirmed its BB- credit rating and stable outlook.

Fitch affirmed its BBB credit rating on Delta Air Lines, Inc. (DAL), maintaining its stable outlook.

One Main Holdings, Inc. (OMF) fell after the company reported disappointing 2Q earnings driven by elevated provisioning. Revenue was roughly in line at $1.06B vs. $1.04B expected, while EPS missed at $1.01 vs. $1.29 expected driven by provisioning of $479M vs. $433M expected. Credit remains stable with net charge-offs of 7.67% in-line with estimates of 7.61% while 30–89-day delinquencies of 2.76% ticked up slightly from 2.73% y/y. Capital allocation remains shareholder friendly as the company maintained the quarterly dividend of $1.00 per share (8.8% annualized yield) and repurchased 169k shares for $7M. FY 2023 guidance now sees managed receivables growth of 5-8%, up from low to mid-single digits, net charge-offs are still expected at 7%-7.5%, along with an operating expense ratio of ~7.1%. Piper Sandler raised its price target to $57 from $53 (26% upside), while JMP lowered its price target to $53 from $55 (17% upside).

Citi raised its price target on United Airlines Holdings, Inc. (UAL) to $84 from $75 (55% upside).

Travel + Leisure Co. (TNL) fell below the 50-day moving average after reporting mixed Q2 results. Revenue missed at $949M vs. $955M expected. EBITDA beat at $236M vs. $234M expected, while EPS disappointed at $1.25 vs. $1.36 expected. Guidance also fell short of expectations with 3Q 2023 EBITDA at $253M vs. $259M expected, while FY 23 EBITDA guidance was roughly in-line at $930M. During the quarter, Travel + Leisure repurchased $100M worth of shares (3.3% of shares outstanding). Barclays lowered its price target to $43 from $44 (7% upside), while JP Morgan lowered its price target to $48 from $55 (20% upside).


Exhibit 3: Significant² Detractors from Opportunity Equity Representative Account Performance, 7/21/23 - 7/28/23

Name	Type	Net Return
S4 Capital PLC	Equity	-21.7%
Delta Air Lines, Inc.	Equity	-5.8%
OneMain Holdings, Inc.	Equity	-4.5%
United Airlines Holdings, Inc.	Equity	-6.0%
Travel + Leisure Co.	Equity	-5.1%

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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.

Patient Capital Management, LLC completed its acquisition of the Opportunity Equity Strategy from Miller Value Partners, LLC on May 26, 2023. Patient Capital Management served as the investment adviser to the Opportunity Equity Strategy for the majority of the week referenced herein. Additionally, prior versions of this weekly blog posting refer to Miller Value Partners as investment adviser to the Opportunity Equity Strategy.

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 Patient Capital Management 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 Patient Capital Management. 

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