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Sep 11, 2023

Opportunity Equity Weekly Update for 9/1/2023 – 9/8/2023

William Keenan

Green Thumb Rises on Repurchase Announcement while on Peloton Falls on Bike Lawsuit

Last week, the Opportunity Equity Strategy's representative account  fell -2.68%, underperforming the S&P 500’s -1.26% fall. (Exhibit 1). The strategy ended the week up 22.48% YTD, 503 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 9/8/231

Time Period Opportunity Equity Representative Account S&P 500
Last Week (9/1 - 9/8) -2.68% -1.26%
MTD -1.74% -1.08%
QTD -2.32% 0.47%
YTD 22.48% 17.45%
1 Year 5.36% 13.18%
5 Year 1.22% 11.10%
10 Year 7.95% 12.53%
Inception (annualized since 6/26/00) 6.51% 6.97%
Source: Bloomberg, Patient Capital Management.

Green Thumb Industries Inc. (GTBIF) continued to rise after the U.S. Department of Health and Human Services (HHS) recommended that cannabis should be moved from a Schedule I to Schedule III controlled substance. Following the announcement, Green Thumb’s Board of Directors approved a plan to repurchase up to $50M shares of common stock (1.9% of shares outstanding).

MT newswires reported that Coinbase Global, Inc. (COIN) had raised $57M from customers on its prime brokerage platform to a launch a crypto lending service for US institutional investors. The company also announced the upsizing of a cash tender offer for its 3.625% senior notes due 2031, from $150M to $180M.

Energy Transfer LP (ET) followed commodity prices marginally higher over the course of the week. Filings revealed that Energy Transfer Co-CEO Marshall McCrea had purchased 50,000 units at $13.64 during the previous week. At the Barclays energy conference, management reiterated its capital allocation strategy of spending $2-$3B on CapEx annually, operating its balance sheet at the lower end of its 4.0x-4.5x range, with opportunistic repurchases more likely going forward.

AP News reported that Alphabet Inc. (GOOGL) was classed as an online gatekeeper in the European Union’s Digital Markets Act, subjecting it to the highest level of scrutiny along with Apple, Amazon, ByteDance, Microsoft, Meta, and other large technology businesses.

Splunk Inc. (SPLK) rose on limited news.

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 9/1/23 - 9/8/23

Name Type Net Return
Green Thumb Industries Inc. Equity 13.8%
Coinbase Global, Inc. Equity 5.3%
Energy Transfer LP Equity 1.0%
Splunk, Inc. Equity 0.8%
Alphabet Inc. Equity 0.5%
Source: Patient Capital Management. See below for additional information.

OneMain Holdings, Inc. (OMF) fell through the 100 and 200-day moving averages. Wells Fargo highlighted that according to alternative data provider, foot traffic in OneMain branches rose during the month of August, following an increase in the company’s marketing mailings, which reached their highest levels since July 2022.

Peloton Interactive, Inc. (PTON) was named a defendant in a lawsuit alleging that the company’s bike product was the cause of death after it fell on a New York man while exercising.

Delta Air Lines, Inc. (DAL) fell below the 100-day moving average. The company announced that retired NFL quarterback Tom Brady had joined the company as a strategic advisor.

Alibaba Group Holding Limited (BABA) fell below the 50 and 200-day moving averages. Bloomberg News reported that the company’s cloud division may seek to raise $2.8B from Chinese state-owned enterprises ahead of its planned listing in Hong Kong.

Mattel, Inc. (MAT) announced it anticipates approximately $125M in gross billings from the Barbie Movie, with a 60% margin.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 9/1/23 - 9/8/23

Name Type Net Return
OneMain Holdings, Inc. Equity -6.0%
Peloton Interactive, Inc. Equity -16.8%
Delta Air Lines, Inc. Equity -4.8%
Alibaba Group Holding Limited Equity -5.2%
Mattel, Inc.   Equity  -3.6%
Source: Patient Capital Management. See below for additional information.

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. 

©2023 Patient Capital Management, LLC