Western Alliance Rises on Earnings Anticipation while OneMain Declines on ABS Deterioration
Last week, the Opportunity Equity Strategy's representative account declined -1.04%, underperforming the S&P 500’s 1.19% rise. (Exhibit 1). The strategy ended the week down -3.52% YTD, 506 basis points behind the S&P 500.
Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 1/19/241
| Time Period | Opportunity Equity Representative Account | S&P 500 |
| Last Week (1/12 - 1/19) | -1.04% | 1.19% |
| MTD | -3.52% | 1.54% |
| QTD | -3.52% | 1.54% |
| YTD | -3.52% | 1.54% |
| 1 Year | 19.51% | 26.18% |
| 5 Year | 6.08% | 14.56% |
| 10 Year | 6.88% | 12.25% |
| Inception (annualized since 6/26/00) | 6.83% | 7.25% |
Source: Bloomberg, Patient Capital Management.
Norwegian Cruise Line Holdings Ltd. (NCLH) rose above the 50-day moving average. Bank of America raised its price target to $18 from $15 (1% upside).
Alphabet Inc. (GOOGL) announced it had begun construction on a new $1B data center in Waltham Cross, north of London, England, after previously purchasing the site in 2020. The company said it “will help ensure reliable digital services to Google Cloud customers and Google users in the UK.” Mizuho raised its price target to $170 from $155 (16% upside), while JMP raised its price target to $150 from $140 (2% upside).
Axios reported that former Meta Platforms, Inc. (META) COO Cheryl Sandberg would be leaving the company’s Board of Directors in May, remaining as an “informal advisor.” Bernstein raised its price target to $435 from $375 (13% upside), while Piper Sandler raised its price target to $415 from $355 (8% upside).
Bloomberg Intelligence highlighted that ahead of 4Q 2023 earnings, Western Alliance Bancorporation (WAL) is on a path to stabilize and grow, employing balance sheet measures to “improve liquidity, carry more insured deposits, and lift capital levels.”
Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 1/12/24 - 1/19/24
| Name | Type | Net Return |
| *New Security* | Equity | 7.9% |
| Norwegian Cruise Line Holdings Ltd. | Equity | 6.0% |
| Alphabet Inc. | Equity | 2.6% |
| Meta Platforms, Inc. | Equity | 2.4% |
| Western Alliance Bancorporation | Equity |
4.5% |
Source: Patient Capital Management. See below for additional information.
OneMain Holdings, Inc. (OMF) fell after Wells Fargo outlined that December asset backed security (ABS) early-stage delinquency trends had performed significantly worse than their expectations and elevated 1H 2024 net charge-offs (NCOs) are expected as a result. Citi raised its price target to $54 from $46 (20% upside).
Delta Air Lines Inc. (DAL) fell through the 50, 100, and 200-day moving averages despite reporting solid 4Q results during the week prior. Susquehanna lowered its price target to $47 from $50 (26% upside).
Citigroup Inc. (C) continued to decline after the bank reported mixed 4Q 2023 results during the previous week. Reuters reported Berkshire Hathaway’s Warren Buffett, in a recent lunch meeting urged CEO Jane Fraser to continue with the company’s reorganization efforts. Oppenheimer raised its price target to $93 from $85 (81% upside), while Bank of America raised its price target to $65 from $60 (26% upside).
Bloomberg reported that UBS Group AG (UBS) had elected to sell the former Credit Suisse’s $250M distressed debt business piecemeal, after the entity had failed to attract a single bidder. In an interview at the World Economic Forum in Davos, Switzerland, UBS Chairman Colm Kelleher highlighted that the bank’s return on equity may exceed its 2026 target of 15% once the merger integration is completed.
Chesapeake Energy Corporation (CHK) followed natural gas prices lower after previously announcing an all-stock acquisition of Southwestern Energy for $6.69 per share, implying a pro-forma market cap of 19B, and making the combined entity the largest independent natural gas producer in the United States. UBS raised its price target to $92 from $86 (21% upside).
Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 1/12/24 - 1/19/24
| Name | Type | Net Return |
| OneMain Holdings, Inc. | Equity | -6.5% |
| Delta Air Lines, Inc. | Equity | -3.1% |
| Citigroup Inc. | Equity | -2.1% |
| UBS Group AG | Equity | -2.6% |
| Chesapeake Energy Corporation | Equity | -8.4% |
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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