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Jan 19, 2021

Opportunity Equity Update for Week Ended 1/15/21

Christina Siegel Malbon

Stitch Fix Gains in Sympathy with POSH IPO, While Precigen Falls Despite Pipeline Progress

Last week, the Opportunity Equity strategy gained 3.76%, outperforming the S&P 500’s -1.46% decline (Exhibit 1). The strategy ended the week up 8.53% YTD, 814 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 1/15/211

Time Period Opportunity Equity S&P 500
Last Week (1/8 - 1/15) 3.76% -1.46%
MTD 8.53% 0.39%
QTD 8.53% 0.39%
YTD 8.53% 0.39%
Inception (annualized since 6/26/00) 9.24% 6.80%

Source: Bloomberg, Miller Value Partners

Stitch Fix, Inc. (SFIX) rose in sympathy with Poshmark, which priced their IPO last week at $42/shr, above the initial range of $35-39/shr and ended the week at $83/shr implying a market cap of $6.96B or 17x estimated FY21 sales. This compares to Stitch Fix, which trades at 4x FY21 sales. Desktop Metal Inc. (DM) posted another strong week as they acquired EnvisionTEC for a cash and stock deal valued at $300mm dollars. The company specializes in photopolymer manufacturing, and does not have a lot of overlap with Desktop’s current product portfolio. Morgan Stanley named Uber Technologies (UBER) a top stock pick for 2021 based on their path to profitability, increasing the price target to $68 from $49 (upside of 22.5%). CEO Dara Khosrowsahi sold about $10.9mm of stock during the week through a 10b5 plan. The company also announced plans to work with Moderna to increase awareness and access to Covid-19 vaccines. OneMain Holdings (OMF) announced a small investment in Curve, an EU Fintech that allows consumers to consolidate credit cards into one account. The company plans to use the funds raised to help them expand internationally including into the US. Bausch Health Companies (BHC) gained after announcing preliminary revenue for the 4th quarter above expectations with revenue expected to be over $2.2B vs consensus of $2.1B. This implies full year revenue of $8.01B above the high end of guidance ($7.8-8B). The company stated that it expects a strong finish to the year in regards to adjusted EBITDA.

Exhibit 2: Significant Contributors to Performance, 1/8/21 - 1/15/21

Name Type Return
Stitch Fix, Inc. Equity 32.9%
Desktop Metal Inc. Equity 14.3%
Uber C32 1/22 Derivative 9.1%
OneMain Holdings Inc. Equity 10.5%
Bausch Health Companies Inc. Equity 14.4%

Source: Miller Value Partners

Precigen Inc. (PGEN) presented at the JPMorgan Healthcare Conference last week where they highlighted their plans to begin development and validation for an UltraCAR “off-the-shelf” library of non-viral plasmids targeting various tumor-associated antigens across a range of hematologic and solid tumor indications. The company also noted that they expect to complete dose-escalation and initiate the expansion portion of the phase 1 study in 2021. The company reported preliminary data suggesting their Phase I study of PRGN-2009 immunotherapy for HPV associated cancers showed increased immune response on repeated administration of the therapy. Vroom, Inc. (VRM) fell through the 50-day moving average. The CFO, David Jones, sold $1M worth of shares in the company via a 10b5 plan. Morgan Stanley maintained their overweight rating on Farfetch Ltd. (FTCH) but increased their price target to $70 from $65 (upside of 20.7%) while UBS raised their price target to $77 from $58 (upside of 32.8%). DXC Technology Company (DXC) fell on limited new developments after Atos approached the company about a friendly takeover last week. Facebook Inc. (FB) fell over the week around concerns regarding the most recent update to their data policy at WhatsApp. The company spent the week responding to concerns around the new policy and clarifying its new terms. The updates come because of the expanded shopping capabilities within the app. Cowen increased their price target to $340 from $330 (upside of 35.3%), while BMO raised the stock to outperform with a $325 price target (upside of 29.3%).

Exhibit 3: Significant Detractors from Performance, 1/8/21 - 1/15/21

Name Type Return
Precigen Inc. Equity -13.9%
Vroom, Inc. Equity -9.6%
Farfetch Ltd Equity -5.7%
DXC Technology Company Equity -3.7%
Facebook Inc. Equity -6.1%

Source: Miller Value Partners

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

1The performance figures reflect the results of a representative account net of management fee and certain other expenses. For important additional information about Opportunity Equity performance, please click on the Opportunity Equity Composite Performance Disclosure. The performance returns shown in this report are preliminary and are subject to revision. Past performance is no guarantee of future results.

Significant Contributors and Significant Detractors are the Strategy holdings that had the greatest effect on Strategy performance for the week. Holdings that have been in the Strategy since the end of the most recent calendar quarter are identified by name. 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. 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. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

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