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May 15, 2024

Opportunity Equity Weekly Update for 5/3/2024 – 5/10/2024

Finn McGinnis

Crocs Jumps on Strong Q1 Print While Coinbase Follows Bitcoin Lower

Last week, the Opportunity Equity Strategy's representative account rose 1.64%, underperforming the S&P 500’s 1.89% gain. (Exhibit 1). The strategy ended the week up 9.07% YTD, 96 basis points behind the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 5/10/241

Time Period Opportunity Equity Representative Account S&P 500
Last Week (5/3 - 5/10) 1.64% 1.89%
MTD 2.72% 3.77%
QTD -2.74% -0.47%
YTD 9.07% 10.03%
1 Year 40.55% 28.22%
5 Year 8.38% 14.52%
10 Year 8.61% 12.84%
Inception (annualized since 6/26/00) 7.29% 7.52%
Source: Bloomberg, Patient Capital Management.

Crocs (CROX) jumped above its 50-day moving average after posting Q1 revenue of $939M and EPS of $3.02, well above consensus of $884.3M and $2.25, respectively, reflecting +15.6% Y/Y growth in the namesake brand. The Q2 guide was in-line with consensus for revenue (1.08Bn-$1.1Bn) and EPS ($3.40-$3.55) while operating margins of 26.5% were +60bps above. The company lifted FY24 earnings guidance to $12.25-$12.73 (from $12.05-$12.50), implying +2%-6% Y/Y growth.
UBS Group (UBS) moved above its 50- and 100-day moving averages following a broad-based Q1 beat with revenue topping estimates by +7% and pretax profits more than double consensus expectations. While non-core exits provided upside, underlying segments posted strong Y/Y growth (Wealth Management +10%, P&C Banking +3%, Investment Banking +32%) while both key integration milestones for the Credit Suisse integration and expense saves remain on track. Management reiterated medium-term targets, including RoCET1 of 15% by year-end 2026 and 18% by 2028.

Meta Platforms (META) continued its post-Q1 earnings rebound on limited news.

Peloton (PTON) jumped above its 50-day moving average on reports that a number of private equity firms are considering a buyout and that the company has held formal talks with at least one.

S4 Capital (SFOR) gained as the company reported Q1 revenue of £186M, a +330bps sequential improvement to -11.7% Y/Y (from -15% in Q4) and in-line with consensus. Management reiterated their cautious macro stance, though reiterated FY24 guidance for revenue (down Y/Y) and EBITDA (flat Y/Y).

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 5/3/24 - 5/10/24

Name Type Net Return
Crocs  Equity 15.3%
 UBS Group AG Equity 9.3%
 Meta Platforms Equity 5.4%
 Peloton Interactive Equity 22.9%
 S4 Capital Equity

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

Coinbase Global (COIN) fell in sympathy with Bitcoin’s -4% slide over the period. 

Precigen (PGEN) fell despite JMP reiterating their outperform rating and $14 price target, +968% above current levels, citing high conviction for positive Phase 2 results for PRGN-2012 in recurrent respiratory papillomatosis. 

Illumina (ILMN) filed its Form 10 in relation to the GRAIL divestiture and stated it remains committed to finalizing the terms of the transaction by the end of Q2. The release highlighted the company will distribute at least 85.5% of GRAIL common shares and that total balance sheet funding is $978M. 

Canada Goose (GOOS) dropped on limited news. 

Expedia (EXPE) fell as Jefferies lowered their price target to $125 (from $140), +10% upside from current levels.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 5/3/24 - 5/10/24

Name Type Net Return
Coinbase Global  Equity -10.0%
Precigen  Equity -10.6%
 Illumina Equity -6.3%
Canada Goose Holdings  Equity -3.8%
Expedia Group  Equity -2.2%
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. 

©2024 Patient Capital Management, LLC