Citigroup Rises on Earnings while Transports Fall on Rising Oil Prices
Last week, the Opportunity Equity Strategy's representative account fell -1.80%, underperforming the S&P 500’s 0.47% rise. (Exhibit 1). The strategy ended the week up 13.78% YTD, 41 basis points behind the S&P 500.
Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 10/13/231
| Time Period | Opportunity Equity Representative Account | S&P 500 |
| Last Week (10/6 - 10/13) | -1.80% | 0.47% |
| MTD | -3.73% | 0.99% |
| QTD | -3.73% | 0.99% |
| YTD | 13.78% | 14.19% |
| 1 Year | 9.91% | 19.92% |
| 5 Year | 1.15% | 11.26% |
| 10 Year | 6.66% | 11.87% |
| Inception (annualized since 6/26/00) | 6.14% | 6.81% |
Source: Bloomberg, Patient Capital Management.
Ovintiv Inc. (OVV) rose above the 50-day moving average following oil prices higher over the course of the week. RBC raised its price target to $50 from $47 (0% upside), while National Bank raised its price target to $69 from $59 (38% upside).
Energy Transfer LP (ET) rose following oil prices higher over the course of the week. In Delaware Supreme Court, Energy Transfer was ordered to pay $495M to Williams over the failure of their proposed merger in 2016. JP Morgan raised its price target to $18 from $17 (30% upside).
Kosmos Energy Ltd. (KOS) rose above the 50-day moving average. The company announced an oil discovery in the U.S. Gulf of Mexico at the Tiberius exploration well. Kosmos has a 33.34% working interest as operator of the well, along with Occidental and Equinor ASA each holding 33.33%.
Citigroup Inc. (C) rose through the 50-day and 100-day moving averages after 3Q 2023 earnings beat consensus estimates. Net revenue came in at $20.1B vs. $19.2B expected, while EPS came in at $1.52 vs. $1.22 for the street. The company beat on both net interest income (NII) coming in at $13.8B vs $13.5B expected and core fees. The company saw a greater than expected improvement in capital ratios, with its CET1 ratio rising 13bps to 13.5% in-line with expectations, resulting in Citi repurchasing $500M (0.6%) of shares outstanding in the quarter. The bank raised FY 2023 NII ex-markets guidance of $46B-$47.5B from $46B. Expenses were unchanged at $54B vs. consensus of $53B, as was the outlook for FY 2023 card net charge offs (NCOs) at 3.13% at the midpoint for branded cards, and 5.25% for retail services. Bank of America lowered its price target to $50 from $60 (21% upside), while Jefferies lowered its price target to $43 from $47 (4% upside).
The Korea Times reported that Amazon.com, Inc. (AMZN) will plan to invest $5.88B in South Korean cloud infrastructure through 2027 to meet growing demand in the country. Amazon reported that during its Prime Big Deal Days event, Prime members saved more than $1B across millions of deals, and 25M items were purchased with same day or next day delivery. Goldman Sachs lowered its price target to $175 from $180 (35% upside).
Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 10/6/23 - 10/13/23
| Name | Type | Net Return |
| Ovintiv Inc. | Equity | 9.5% |
| Kosmos Energy Ltd. | Equity | 6.9% |
| Energy Transfer LP | Equity | 2.7% |
| Citigroup Inc. | Equity | 2.1% |
| Amazon.com, Inc. | Equity | 1.4% |
Source: Patient Capital Management. See below for additional information.
Delta Air Lines Inc (DAL) fell despite reporting strong 3Q earnings. Adjusted EPS came in at $2.03 vs. consensus estimates of $1.94, while revenues came in ahead of expectations at $14.6B vs. $14.5B expected. The company guided for 4Q23 Revenue to be up 9%-12% y/y, with operating margins of 10% at the midpoint, and EPS of $1.05 to $1.30. For full year 2023, Delta lowered its EPS outlook to $6.13 at the midpoint from $6.50, and operating margins to ~11.5% from 12% at the midpoint. JP Morgan lowered its price target to $68 from $71 (99% upside), while Raymond James raised its price target to $55 from $54 (61% upside).
Norwegian Cruise Line Holdings Ltd. (NCLH) fell below the 200-day moving average on rising oil prices. The company priced $790M of senior notes at 8.125% and named Jose Cil to its Board of Directors. Barclays lowered its price target to $20 from $21 (35% upside).
Bank of America lowered its price target on Canada Goose Holdings Inc. (GOOS) to C$17 from C$20 (-4% downside).
United Airlines Holdings, Inc. (UAL) fell on rising oil prices. Susquehanna lowered its price target to $44 from $57 (11% upside), while Seaport lowered its price target $69 from $82 (78% upside).
IAC Inc (IAC) fell on limited news.
Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 10/6/23 - 10/13/23
| Name | Type | Net Return |
| Delta Air Lines, Inc. | Equity | -7.5% |
| Norwegian Cruise Line Holdings Ltd. | Equity | -10.8% |
| Canada Goose Holdings Inc. | Equity | -7.8% |
| United Airlines Holdings, Inc. | Equity | -7.4% |
| IAC Inc | Equity | -4.5% |
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
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