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Jan 18, 2023

Opportunity Equity Update for Week Ended 1/13/23

William Keenan

United Rises on Strong Delta Earnings While Green Thumb Falls Despite Recreational Rollout in Connecticut

Last week, the Opportunity Equity Strategy's representative account gained 9.75%, outperforming the S&P 500’s 2.71% rise. (Exhibit 1). The strategy ended the week up 15.78% YTD, 1,156 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 1/13/231

Time Period Opportunity Equity Representative Account S&P 500
Last Week (1/6 - 1/13) 9.75% 2.71%
MTD 15.78% 4.22%
QTD 15.78% 4.22%
YTD 15.78% 4.22%
1 Year -26.68% -12.74%
5 Year 2.17% 9.41%
10 Year 10.57% 12.66%
Inception (annualized since 6/26/00) 6.43% 6.61%

Source: Bloomberg, Miller Value Partners. Visit the Strategy page for Opportunity Equity performance through the most current month end period.

Coinbase Global, Inc. (COIN) rose above the 50-day moving average following cryptocurrencies higher. The company announced it would reduce its headcount by 950 (~20% of employees) as part of its ongoing restricting plan, and expects to take $149 to $163M in restructuring charges, reducing OpEx 25% q/q. The company sees preliminary EBITDA losses for 2022 within the -$500M loss “guardrail” previously outlines and sees preliminary results consistent with the outlook given for its 4Q outlook on November 3rd. Bloomberg also reported that VP for Business Development and International, Nana Murugesan, announced plans to wind down most Japan operations, as part of a broader strategy to “right size” and make sure “investments are aligned with the local opportunity.” JMP lowered its price target to $80 from $155 (60% upside), while Barclays raised its price target to $45 from $37 (-10% downside). S&P downgraded its credit rating on the company to BB- from BB, with a negative outlook.

Norwegian Cruise Line Holdings Ltd. (NCLH) rose above the 50, 100, and 200-day moving averages. The Wall Street Journal reported that four cruise lines, including Norwegian, would appeal the ruling that ordered them to pay a combined $436M to Havana Docks Corp. On December 30th, Justice Beth Bloom of the United States District Court for the Southern District of Florida had previously ordered Norwegian to pay $110M to Delaware-registered Havana Docks Corp., ruling that the use of the Havana Cruise Port terminal constituted trafficking in property owned by the plaintiff and illegally confiscated by the Communist Party of Cuba following the 1959 Cuban Revolution. NCLH was rated a new buy at Melius Research with a $17 price target (9% upside), while UBS lowered its price target to $13 from $19 (-17% downside), and Morgan Stanley lowered its price target to $11.50 from $13 (-26% downside), downgrading the name from equal weight to underweight.

United Airlines Holdings, Inc. (UAL) continued to gain over the week as American Airlines pre-announced and Delta Airlines announced 4Q earnings that exceeded analyst expectations. Barclays raised its price target to $45 from $42 (-13% downside), while Susquehanna also raised its price target to $45 from $35 (-13% downside).

Expedia Group Inc (EXPE) rose above the 50 and 100-day moving averages. Oppenheimer upgraded the name to outperform from market perform with a $120 price target (13% upside), highlighting that the market does not yet fully appreciate the company’s fully-integrated technology stack and new loyalty program, Expedia Rewards., Inc. (AMZN) rose above the 50-day moving average. Bloomberg News reported that John Smedley, general manager of Amazon Games, would be stepping down from his role. Goldman Sachs lowered its price target to $145 from $165 (48% upside), while Cowen lowered its price target to $140 from $160 (43% upside).

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 1/6/23 - 1/13/23

Name Type Net Return
Coinbase Global, Inc. Equity 50.3%
Norwegian Cruise Line Holdings Ltd. Equity 19.9%
United Airlines Holdings, Inc. Equity 22.3%
Expedia Group Inc Equity 12.7%, Inc. Equity 14.0%

Source: Miller Value Partners. See below for additional information.

Green Thumb Industries (GTBIF) fell on limited news – the only detractor from performance during the week. Connecticut became the latest state to begin recreational cannabis sales, where Green Thumb currently operates one location. Previously, state regulators outlined that they would target licensing 100 stores by the end of 2023.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 1/6/23 - 1/13/23

Name Type Net Return
Green Thumb Industries Inc Equity -3.3%
Cash Cash 0.0%
Pangaea One, L.P. Equity 0.0%
TCRT Restricted Warrant 2019 Derivative 18.2%
Fiserv Inc Equity 0.4%

Source: Miller Value Partners. See below for additional information.

Check out the Income Strategy weekly Update. Click to Read.

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.

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 Miller Value Partners 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 Miller Value Partners. 

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