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Dec 04, 2023

Opportunity Equity Strategy Update for 11/24/2023 - 12/1/2023

William Keenan

General Motors Rises on Guidance Reinstatement while Alibaba Continues to Decline on Change in Strategy

Last week, the Opportunity Equity Strategy's representative account gained 4.29%, outperforming the S&P 500’s 0.83% rise. (Exhibit 1). The strategy ended the week up 26.44% YTD, 492 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 12/1/231

Time Period Opportunity Equity Representative Account S&P 500
Last Week (11/24 - 12/1) 4.29% 0.83%
MTD 2.57% 0.60%
QTD 6.97% 7.47%
YTD 26.44% 21.52%
1 Year 12.36% 14.60%
5 Year 3.60% 12.65%
10 Year 6.89% 11.88%
Inception (annualized since 6/26/00) 6.58% 7.05%
Source: Bloomberg, Patient Capital Management.

OneMain Holdings, Inc. (OMF) rose above the 100 and 200-day moving averages. Cowen previewed the company’s upcoming investor day where it expects OneMain to outline its ability to remain profitable and fund its dividend even in the event of a recession. Wells Fargo highlighted that its November branch foot traffic tracker rose 1.3% y/y and raised its price target to $43 from $38 (1% upside).

General Motors Company (GM) rose above the 50 and 100-day moving averages after the company reintroduced FY 2023 guidance including midpoint EBIT of $12.2B vs. consensus of $12.3B, midpoint EPS of $7.45 vs. consensus at $7.42, and automotive FCF at the midpoint of $11B, well ahead of the street at $7.5B, implying FCF per share of $9.46 (29% yield). The company concurrently announced an accelerated $10B share repurchase (22% of shares outstanding), with $6.8B worth of shares retired immediately, and another $3.2B expected by year-end FY 2024. GM also has another $1.4B in repurchase capacity expected to be deployed on an opportunistic basis. Wedbush lowered its price target to $40 from $46 (24% upside), while Wells Fargo raised its price target to $27 from $25 (-17% downside).

Coinbase Global, Inc. (COIN) continued to follow bitcoin prices higher over the course of the week.

At the Financial Times Global Banking Summit in London, UBS Group AG (UBS) CEO Colm Kelleher highlighted that “bad actors” have left recently acquired Credit Suisse, and that UBS will be a “totally revalued stock in 5 years.” JP Morgan placed the name on its “positive catalyst watch” ahead of 4Q results which it expects to include updated financial targets along with guidance and capital returns.

Norwegian Cruise Line Holdings Ltd. (NCLH) rose above the 50 and 200-day moving averages. Norwegian’s newest ship, Norwegian Viva, was officially christened in a ceremony in Miami, Florida.

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 11/24/23 - 12/1/23

Name Type Net Return
OneMain Holdings, Inc. Equity 13.2%
General Motors Co Equity 15.1%
Coinbase Global, Inc. Equity 15.8%
UBS Group AG Equity 8.9%
Norwegian Cruise Line Holdings Ltd. Equity

Source: Patient Capital Management. See below for additional information.

Alphabet Inc. (GOOGL) fell below the 50 and 100-day moving averages. The company reached an agreement with the Canadian Government on Canada’s Online News Act, in which Google has agreed to remit annual payments of C$100M in advertising revenue sharing to support local news businesses.

Alibaba Group Holding Limited (BABA) continued to decline after the company announced a shift in strategic direction during the previous week, canceling the spinoff of its cloud division and initiating a dividend. Loop Capital lowered its price to $115 from $125 (69% upside).

Meta Platforms, Inc. (META) was named in a lawsuit distributed by California Attorney General Rob Bonta, alleging that CEO Mark Zuckerberg vetoed a proposal to ban filters simulating the effects of plastic surgery, despite concerns that the filters could be harmful to users’ mental health. Filings revealed that CEO Mark Zuckerberg sold over $190M worth of shares during the month of November.

S4 Capital PLC (SFOR LN) and PureTech Health PLC (PRTC LN) declined on limited news.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 11/24/23 - 12/1/23

Name Type Net Return
Alphabet Inc. Equity -3.5%
Alibaba Group Holding Limited  Equity -5.7%
Meta Platforms, Inc.  Equity -4.0%
S4 Capital PLC Equity  -7.7%
PureTech Health PLC  Equity -6.0%
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