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Dec 11, 2023

Opportunity Equity Weekly Update for 12/1/2023 – 12/8/2023

William Keenan

Delta Rises on Guidance Affirmation while Energy Names follow Commodity Prices Lower

Last week, the Opportunity Equity Strategy's representative account gained 2.47%, outperforming the S&P 500’s 0.24% rise. (Exhibit 1). The strategy ended the week up 29.56% YTD, 775 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 12/8/231

Time Period Opportunity Equity Representative Account S&P 500
Last Week (12/1 - 12/8) 2.47% 0.24%
MTD 5.10% 0.83%
QTD 9.62% 7.73%
YTD 29.56% 21.81%
1 Year 23.42% 18.11%
5 Year 5.32% 13.76%
10 Year 7.23% 11.91%
Inception (annualized since 6/26/00) 6.69% 7.06%
Source: Bloomberg, Patient Capital Management.

Expedia Group, Inc. (EXPE) announced new B2B partnerships in Europe with Ryanair, Icelandair, Iberia, the European Travel Commission (ETC) and other organizations.

Citi raised its price target on Norwegian Cruise Line Holdings Ltd. (NCLH) to $18 from $16 (-4% downside).

Delta Air Lines, Inc. (DAL) affirmed its guidance for 4Q23 with revenue up 9%-12% YoY, operating margins of 10% at the midpoint, and EPS of $1.05 to $1.30. For full year 2023, Delta maintained its EPS outlook of $6.13 at the midpoint, and operating margins at ~11.5%. At the Morgan Stanley consumer conference, Delta President Glen Hauenstein highlighted that upcoming travel demand looked “very, very strong” over the Christmas Holiday after a record Thanksgiving.

Coinbase Global, Inc. (COIN) continued to follow bitcoin prices higher over the course of the week. At the Goldman Sachs Financial Services Conference, CEO Brian Armstrong highlighted that he was “optimistic” on the US crypto environment, and that his firm has a “great chance” to win in its case with the US Securities Exchange Commission (SEC).

OneMain Holdings, Inc. (OMF) continued to rise following its Investor Day, where the company outlined its growth avenues in credit cards and automotive financing, while emphasizing the business’s strong balance sheet and differentiated underwriting enabling it to weather a recession. Management unveiled their medium-term goal to grow receivables to $30B from $22B today, with capital generation of $12.50 per share. After funding growth investments and its dividend, OneMain expects to have $6 per share in excess capital to deploy towards share repurchases and dividend growth. TD Cowen raised its price target to $50 from $43 (11% upside).

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 12/1/23 - 12/8/23

Name Type Net Return
Expedia Group, Inc. Equity 4.4%
Norwegian Cruise Line Holdings Ltd. Equity 13.8%
Delta Air Lines, Inc. Equity 6.0%
Coinbase Global, Inc. Equity 9.7%
OneMain Holdings, Inc. Equity

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

Energy Transfer (ET) fell below the 50 and 100-day moving averages following commodity prices lower over the course of the week.

Kosmos Energy Ltd. (KOS) followed commodity prices lower over the course of the week.

Mattel, Inc. (MAT) fell below the 200-day moving average.

JP Morgan lowered its price target on Chesapeake Energy Corporation (CHK) to $96 from $97 (28% upside).

Peloton Interactive, Inc. (PTON) Chief Marketing Officer (CMO), Leslie Berland, resigned from the company effective December 31st to join Verizon as CMO.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 12/1/23 - 12/8/23

Name Type Net Return
Energy Transfer LP Equity -4.2%
Kosmos Energy Ltd.  Equity -5.7%
Mattel, Inc.  Equity -3.0%
Chesapeake Energy Corporation Equity  -6.8%
Peloton Interactive, Inc.  Equity -3.9%
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