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Jan 31, 2023

Opportunity Equity Update for Week Ended 1/27/23

William Keenan

Capital One Rises on Solid Results While Precigen Falls on Equity Offering Following Positive Phase 1 Trial Results

Last week, the Opportunity Equity Strategy's representative account gained 3.43%, outperforming the S&P 500’s 2.48% rise. (Exhibit 1). The strategy ended the week up 20.44% YTD, 1,433 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 1/27/231

Time Period Opportunity Equity Representative Account S&P 500
Last Week (1/20 - 1/27) 3.43% 2.48%
MTD 20.44% 6.11%
QTD 20.44% 6.11%
YTD 20.44% 6.11%
1 Year -13.08% -4.35%
5 Year 3.35% 9.13%
10 Year 10.37% 12.63%
Inception (annualized since 6/26/00) 6.61% 6.68%

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

Wells Fargo highlighted Farfetch Limited (FTCH) as a top pick in 2023, citing a re-opened China’s strong demand for a luxury goods as a key upside catalyst, and re-iterating its $18 price target (153% upside). Luxury brands have called out strong performance YTD in China bolstering investor expectations for Farfetch.

Capital One Financial Corporation (COF) rose above the 200-day moving average after announcing solid 4Q earnings. Revenue came in at $9.04B vs. $9.01B expected, while EPS came in at $2.82 vs. $3.79. Excluding a ~$1B (-$2.03 per share) net charge-off allowance build, 4Q EPS was $4.85. Net interest income (NII) exceeded expectations coming in at $7.2B vs $7.1B expected, while the company saw a greater than expected improvement in capital ratios, as the CET1 ratio rose 30bps to 12.5% vs. 11.9% expected, above the company’s long-term target of 11%. Over the course of FY 2022, Capital One repurchased ~$4.8B worth of shares (~13.7% of shares outstanding). BMO lowered its price target to $141 from $152 (20% upside), while JP Morgan lowered its price target to $120 from $124 (2% upside).

OneMain Holdings, Inc. (OMF) rose over the course of the week after consumer lending competitor Capital One reported strong 4Q 2022 results.

Coinbase Global, Inc. (COIN) rose above the 100-day moving average following bitcoin prices higher throughout the week.

Expedia Group, Inc. (EXPE) continued to rise throughout the week. Bank of America highlighted the name as a top pick in 2023 given FCF support, share repurchases, positive traffic data, and a large valuation discount to competing online travel agency JMP also highlighted Expedia as a top pick citing its compressed multiple relative to Booking. Bank of America raised its price target to $143 from $138 (19% upside), while Barclays raised its price target to $129 from $125 (8% upside).

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 1/20/23 - 1/27/23

Name Type Net Return
Farfetch Ltd Equity 12.9%
Capital One Financial Corporation Equity 12.9%
OneMain Holdings, Inc. Equity 6.1%
Coinbase Global, Inc. Equity 11.0%
Expedia Group, Inc. Equity 4.4%

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

Chesapeake Energy Corporation (CHK) followed commodity prices lower over the course of the week. Wells Fargo initiated coverage of the name with a $117 price target (34% upside), while Benchmark lowered its price target to $115 from $137 (31% upside).

PureTech Health PLC (PRTC LN) fell below the 100-day moving average.

Precigen, Inc. (PGEN) fell below the 50, 100, and 200-day moving averages after the company announced positive results from the Phase 1 trial of its PRGN-2012 AdenoVerse Immunotherapy for patients with recurrent respiratory papillomatosis (RRP), significantly de-risking the asset on a clinical basis. The Phase 2 portion of the trial is ongoing and has enrolled at least 20/48 patients to date. Precigen estimates the peak annual market size for the therapy to be over $1B domestically, and $2B internationally. Concurrent to the announcement, the company sold 43M new shares in an equity financing at $1.75 per share, raising $75M to be used to further progress their pipeline assets and commercialization efforts for PRGN-2023. The cash should provide a runway through 2024. Stifel raised its price target to $6.10 from $4.20 (272% upside).

Norwegian Cruise Line Holdings Ltd. (NCLH) and Green Thumb Industries Inc. (GTBIF) declined on limited news.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 1/20/23 - 1/27/23

Name Type Net Return
Norwegian Cruise Line Holdings Ltd. Equity -2.9%
Green Thumb Industries Inc. Equity -6.0%
Chesapeake Energy Corp Equity -3.6%
PureTech Health PLC Equity -3.3%
Precigen Inc. Equity -5.9%

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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