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Jan 22, 2025

Opportunity Equity Weekly Update for 1/10/2025 – 1/17/2025

Finn McGinnis

Citi Rises on Strong Earnings while QXO Falls on Rejected Offer

Last week, the Opportunity Equity Strategy’s representative account gained 2.01%, underperforming the S&P 500’s 2.93% gain. (Exhibit 1). The strategy ended the week up 3.14% YTD, 113 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 1/17/251

Time Period Opportunity Equity Representative Account S&P 500
Last Week (1/10 - 1/17) 2.01% 2.93%
MTD 3.14% 2.01%
QTD 3.14% 2.01%
YTD 3.14% 2.01%
1 Year 37.19% 28.29%
5 Year 8.64% 14.27%
10 Year 9.88% 13.54%
Inception (annualized since 6/26/00) 7.87% 7.95%
Source: Bloomberg, Patient Capital Management.

Citigroup Inc. (C)
reached a new 52-week high after beating on the top and bottom line. The company grew sales and operating leverage across all five lines of their business, delivering revenue of $19.6B vs. $19.5B expected and EPS of $1.34 vs. $1.22 expected. The company guided for 2026 return on tangible common equity (ROTCE) between 10% and 11% and announced board approval for a new $20B share repurchase program (13% of the current market cap), after returning nearly $7B to shareholders in 2024 (7% of the current market cap). Wells Fargo reiterated Citi as their number one large cap bank stock and maintained their price target of $110 (38% upside). They believe Citi should trade at a slight premium to tangible book given their value creation from improved ROTCE and large share repurchase program.

SoFi Technologies, Inc. (SOFI) rose through the 50-day moving average. Citi increased their price target from $12.50 to $18.00 (9% upside). Jefferies remained bullish on their latest fintech update. They expect increased loan origination volumes and net interest margin expansion across the industry.    

Coinbase Global, Inc. (COIN) rose through the 50-day moving average, following bitcoin’s 10.6% move higher.

CVS Health Corp (CVS) rose through the 50-day moving average. Wells Fargo increased their price target from $65 to $68 (29% upside). They expect Medicare Advantage (MA) rates will increase 2.2% in 2026. Wells Fargo believes MA could be one of the most attractive businesses in healthcare if reimbursement improves under the company’s new CostVantage plan and legislative focus on the industry subsides.

Energy Transfer LP (ET) reached a new 52-week high, following West Texas Intermediate’s (WTI) 1.7% move higher. Barclays increased their price target from $24 to $25 (23% upside). They are confident in the company’s diversified business base and see additional long-term growth potential from natural gas projects.

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 1/10/25 - 1/17/25

Name Type Net Return
Citigroup Inc. Equity 12.0%
SoFi Technologies, Inc. Equity 16.5%
Coinbase Global, Inc. Equity 14.2%
CVS Health Corp  Equity 9.6%
Energy Transfer LP  Equity 4.5%
Source: Patient Capital Management. See below for additional information.

 
QXO, Inc. (QXO) fell through the 50-day moving average after placing a bid to purchase Beacon Roofing at $124.25 per share on Wednesday (14% premium over Tuesday’s close). Beacon rejected the bid, believing the offer significantly undervalues the company.

Dave & Buster's Entertainment, Inc. (PLAY) reached a new 52-week low after Truist lowered their price target from $36 to $27 (12% upside) and maintained their hold rating. Truist’s latest credit card data points to a potential 4Q24 sales miss. 

Crocs, Inc. (CROX) fell through the 50-day moving average after Caleres, a global footwear company, cut their annual sales guidance for the third time. Williams Trading lowered their price target from $126 to $112 (12% upside) and downgraded the name to a “hold”.

Biogen Inc. (BIIB) submitted a bid to acquire Sage, a small biotech company that develops treatments for debilitating brain disorders. Biogen offered $7.22 per share (30% premium over Sage’s previous close) or roughly $469M. Sage had $569M in cash and equivalents on the balance sheet as of 9/30. Biogen currently owns a 10% stake in Sage and splits sales with them on Zurzuvae, a co-developed oral treatment for postpartum depression (PPD). The acquisition would consolidate economics on PPD, build Biogen’s neurology vertical, and provide Biogen with various early-stage assets that have long-term growth potential.

Peloton Interactive, Inc. (PTON) fell on limited news.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 1/10/25 - 1/17/25

Name Type Net Return
QXO, Inc. Equity -10.6%
Dave & Buster's Entertainment, Inc. Equity -14.7%
Crocs, Inc. Equity -9.2%
Biogen Inc. Equity -5.6%
Peloton Interactive, Inc Equity -6.7%
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