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May 20, 2024

Opportunity Equity Weekly Update for 5/10/2024 – 5/17/2024

Finn McGinnis

Canada Goose Jumps on Strong Fiscal Q4 Earnings While Amazon Falls on AWS Leadership Transition

Last week, the Opportunity Equity Strategy's representative account rose 1.91%, outperforming the S&P 500’s 1.60% gain. (Exhibit 1). The strategy ended the week up 11.15% YTD, 65 basis points behind the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 5/17/241

Time Period Opportunity Equity Representative Account S&P 500
Last Week (5/10 - 5/17) 1.91% 1.60%
MTD 4.69% 5.43%
QTD -0.88% 1.12%
YTD 11.15% 11.80%
1 Year 40.01% 29.51%
5 Year 9.91% 15.04%
10 Year 8.78% 13.02%
Inception (annualized since 6/26/00) 7.37% 7.58%
Source: Bloomberg, Patient Capital Management.

Canada Goose (GOOS) rose above its 50-, 100-, and 200-day moving averages following a strong fiscal Q4 print with sales growth of +22.1% and EPS of C$0.19 both topping estimates of +7.9% and C$0.06, respectively. The company initiated FY25 guidance, including mid-teens EPS growth, low-single-digit revenue growth, and EBIT margin expansion of ~100bps.

Alibaba (BABA) reported fiscal Q4 revenue growth of +7%, topping estimates by ~100bps while EPS of Rmb 10.14 was in-line. Results reflect strength in both Alibaba International Digital Commerce (revenue +45% Y/Y) and Local Services Group (revenue +19% Y/Y). The company repurchased $4.8Bn of stock in the period and announced an annual dividend of $1 per ADS and special dividend of $0.66 per ADS (~2% yield). Looking to FY25, management expects cloud revenue to re-accelerate back to double-digit growth in the back half of the year and international eCommerce to see sequential improvement in unit economics.

Alphabet (GOOGL) rose in concert with the company’s annual developer conference, Google I/O, where management showcased Gemini integration across the ecosystem. Further, the event included introductions to a variety of improved large language models and next-generation processing units that are expected to deliver 4.7x improvement in compute performance per chip.

Biogen (BIIB) rose above its 100-day moving average as Leqembi partner Eisai (4523 JT) reported Q1 global sales of ¥2.83Bn (~$18M) and US sales of ¥2.44Bn (~$16M), the latter of which represents a 2.3x expansion vs the prior quarter. Eisai expects global sales of ¥56.6Bn (~$360M) for the year ending 1Q25, which is ~20% above consensus of ~$300M.

S4 Capital (SFOR) rose above its 200-day moving average. Barclays raised its price target from £50 to £65, upside of +11%.

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 5/10/24 - 5/17/24

Name Type Net Return
Canada Goose Equity 21.7%
Alibaba Equity 10.6%
Alphabet Equity 4.4%
Biogen Equity 4.1%
S4 Capital Equity

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

Amazon (AMZN) announced current AWS CEO Adam Selpisky is planning to step down and will be replaced by Matt Garman, an 18yr AWS veteran and current SVP. Further, the company held their first ad Upfront, announcing ad-supported Prime Video has reached 115M+ viewers in the US and 200M+ viewers globally.

Kosmos Energy (KOS) fell below its 100-day moving average despite Brent’s +1.5% move higher over the week. 

Peloton (PTON) announced plans to raise $850M through a new loan sale to refinance existing debt.

OneMain Holdings (OMF) fell despite strong April Trust data, highlighting credit trends performing better than normal seasonality. Net charge-offs fell 58bps M/M (vs 28bps historical average) while early-stage delinquencies dropped 14bps M/M (vs 5bps historical average) and late-stage delinquencies dropped 27bps (vs 7bps historical average).

Crocs (CROX) fell on limited news.  

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 5/10/24 - 5/17/24

Name Type Net Return
 Amazon Equity -1.5%
Kosmos Energy  Equity -3.0%
Peloton  Equity -6.9%
OneMain Holdings  Equity -1.4%
Crocs  Equity -1.6%
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