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Oct 24, 2022

Opportunity Equity Update for Week Ended 10/21/22

Christina Siegel Malbon

United Rises on Strong Earnings while Silvergate Falls on Lower Deposits

Last week, the Opportunity Equity Strategy's representative account gained 6.40%, outperforming the S&P 500’s 4.75% rise. (Exhibit 1). The strategy ended the week down -31.49% YTD, 1,124 basis points behind the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 10/21/221

Time Period Opportunity Equity Representative Account S&P 500
Last Week (10/14 - 10/21) 6.40% 4.75%
MTD 9.11% 4.75%
QTD 9.11% 4.75%
YTD -31.49% -20.25%
Inception (annualized since 6/26/00) 6.12% 6.35%

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

Cowen lowered its price target on, Inc. (AMZN) to $195 from $215 (63% upside), while Credit Suisse lowered its price target to $159 from $170 (33% upside). Norwegian Cruise Line Holdings Ltd. (NCLH) rose above the 50 and 100-day moving averages. Morningstar published a bullish note on the travel space calling out Norwegian as an attractive investment trading at a 54% discount to their estimate of value. The analyst believes that strong travel demand will persist into 2023.

Green Thumb Industries Inc. (GTBIF) rose above the 50 and 100-day moving averages after the company reached an agreement with Circle K to start selling cannabis in 10 of the chain’s convenience store locations in Florida. Uber Technologies Inc (UBER) rose above the 100-day moving average. The company launched a dedicated advertising division while also unveiling Journey Ads, which will allow brands to engage with consumers throughout the entire Uber ride.

United Airlines Holdings, Inc. (UAL) rose through the 50 and 100-day moving averages. The company reported strong 3Q results with revenue of $12.9B above consensus of $12.7B with EPS well ahead of expectations at $2.81 vs $2.29 expected. Total revenue per available seat mile (TRASM) was 26% higher than 2019 levels on 10% less capacity, continuing to show strong demand and pricing power. Management called out September as the 3rd highest TRASM quarter in history but called out October being on track to replace September as their 3rd best TRASM month ever. Corporate travel has now recovered to 80% of pre-COVID levels and growing. The company provided strong forward guidance with 4Q adjusted operating margins of 10% and EPS in the range of $2.00-2.25 well ahead of consensus of $1.01. The company expects TRASM to be up 24-25% vs 2019 levels while on 9-10% less capacity. Citi raised its price target to $65 from $56 (61% upside), while Bank of America raised its price target to $40 from $35 (-1% downside).

Exhibit 2: Significant Contributors to Opportunity Equity Representative Account Performance, 10/14/22 - 10/21/22

Name Type Return, Inc. Equity 11.6%
Norwegian Cruise Line Holdings Ltd. Equity 14.6%
Green Thumb Industries Inc. Equity 18.2%
Uber Technologies Inc Equity 13.4%
United Airlines Holdings, Inc. Equity 14.0%

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

Silvergate Capital Corporation (SI) fell after reporting Q3 earnings that fell short of expectations. Revenue came in below consensus at $89.3M vs. $100.2M expected with EPS of $1.28 missing consensus of $1.41. The company reported non-interest-bearing deposits that were below consensus at $12.1B vs $13.7B expected while SEN transaction volumes declined to $113B, down 41%. Canaccord Genuity lowered its price target to $150 from $200 (178% upside), while Craig-Hallum lowered its price target to $100 from $160 (85% upside).

Wells Fargo lowered its price target on OneMain Holdings, Inc. (OMF) to $33 from $40 (7% upside) ahead of 3Q results which will be announced this week. JP Morgan lowered its price target to $38 from $44 (23% upside). Alibaba Group Holdings Limited (BABA) fell along with other Chinese technology companies as China’s National Bureau of Statistics announced that it was delaying indefinitely the release of economic data that had been scheduled for Tuesday morning. The announcement occurred as the country’s ruling party gather in Beijing for a weeklong national congress of the Communist Party. Many speculated the delayed implied worse results than officials expected.

Taylor Morrison Home Corporation (TMHC) fell after economic data showed US housing starts declined and mortgage applications fell. September total housing starts fell 8.1% sequentially to 1,439k, more than the 7.2% decline expected. Multi-family starts were down the most at -13.2% sequentially and -17.6% YoY while single-family starts fell 4.7% sequentially and -18.5% YoY. B. Riley lowered its price target on the company to $26 from $28 (5% upside). Stitch Fix, Inc. (SFIX) fell on limited news.

Exhibit 3: Significant Detractors from Opportunity Equity Representative Account Performance, 10/14/22 - 10/21/22

Name Type Return
Silvergate Capital Corporation Equity -20.0%
OneMain Holdings, Inc. Equity -5.6%
Alibaba Group Holding Limited Equity -1.0%
Taylor Morrison Home Corporation Equity -0.2%
Stitch Fix, Inc. Equity -0.6%

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

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1The performance figures for the representative Opportunity Equity account reflect the deduction investment management fees and certain other expenses.

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.

Significant 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. Returns listed above represent the market performance of the individual security during the week, or for the partial period held in the portfolio 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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