Last week, the Opportunity Equity strategy rose 6.87%, outperforming the S&P 500’s 1.56% rise. (Exhibit 1). The strategy ended the week down -32.90% YTD, 1,022 basis points behind the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 10/7/221
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (9/30 - 10/7) | 6.87% | 1.56% |
| MTD | 6.87% | 1.56% |
| QTD | 6.87% | 1.56% |
| YTD | -32.90% | -22.68% |
| Inception (annualized since 6/26/00) | 6.03% | 6.22% |
Source: Bloomberg, Miller Value Partners
Ovintiv Inc. (OVV) and Diamondback Energy (FANG) rose above the 50, 100, and 200-day moving averages following commodity prices higher over the course of the week as OPEC+ announced it would cut production by 2M bbl/day starting in November. Piper Sandler raised its price target on Diamondback to $193 from $187 (36% upside).
Green Thumb Industries Inc. (GTBIF) rose above the 50 and 100-day moving averages after President Biden announced his intent to pardon federal offenders convicted of non-violent, minor cannabis possession while urging state governors to do the same. More importantly, President Biden ordered the Attorney General and the Department of Health and Human Services (HHS) to initiate a process to review if cannabis is properly scheduled as a Schedule 1 controlled substance, placing it among heroin and LSD and higher than methamphetamine and fentanyl. These positive announcements came after the company announced the resignation of three board members, William Gruver, Glen Senk and Dorri McWhorter due to a disagreement over the company’s policies and practices related to personal misconduct.
Norwegian Cruise Line Holdings Ltd. (NCLH) rose after hosting an investor day in which management highlighted the company’s unique go to market and pricing strategy among cruise lines. Management re-affirmed its confidence in record yields and EBITDA for FY 2023 backed by strong advance bookings and highlighted its long term de-leveraging target of 3x net debt-to-EBITDA by 2025. Management also expects the company to be FCF positive in Q4 2022.
Taylor Morrison Home Corporation (TMHC) rose on limited news.
Exhibit 2: Significant Contributors to Performance, 9/30/22 - 10/7/22
| Name | Type | Return |
| Ovintiv Inc. | Equity | 20.8% |
| Green Thumb Industries Inc. | Equity | 41.5% |
| Diamondback Energy Inc | Equity | 18.2% |
| Norwegian Cruise Line Holdings Ltd. | Equity | 13.6% |
| Taylor Morrison Home Corporation | Equity | 10.1% |
Source: Miller Value Partners
PureTech Health PLC (PRTC) fell below the 50-day moving average after the company confirmed that it had exchanged indicative, non-binding proposals with Nektar Therapeutics (NKTR) regarding a possible combination.
Karuna Therapeutics, Inc. (KRTX) fell below the 50-day moving average after the CFO, Troy Ignelzi, sold 15k shares which the company says was part of a tax and risk concentration strategy. However, investors consider this a signal that immediate-term M&A is now less likely.
Splunk Inc. (SPLK) filed a patent infringement lawsuit against private observability competitor Cribl, alleging that the company illegally uses Splunk’s intellectual property. UBS downgraded the stock to a Neutral rating from a Buy rating lowering its price target to $86 from $125 (18% upside) due to concern stemming from recent industry checks which shows pressure outside of just macro.
Bank of America and Goldman Sachs lowered their prices targets on Meta Platforms, Inc. (META) over the week with BofA bringing their price target down to $196 from $218 (47% upside), while Goldman brought their price target to $200 from $255 (50% upside). Founder, Mark Zuckerberg, announced a hiring freeze and restructuring plan while the Wall Street Journal reported the company plans to shrink its office space footprint.
Exhibit 3: Significant Detractors from Performance, 9/30/22 - 10/7/22
| Name | Type | Return |
| PureTech Health PLC | Equity | -8.4% |
| Karuna Therapeutics, Inc. | Equity | -6.5% |
| *New Security* | Equity | -6.8% |
| Splunk Inc. | Equity | -3.0% |
| Meta Platforms, Inc. | Equity | -1.6% |
Source: Miller Value Partners
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1 The performance figures reflect the deduction of a model investment management fee of 1% (the highest fee for separate accounts under our fee schedule) and certain other expenses. For important information about Opportunity Equity Strategy performance, please click on the Opportunity Equity Strategy 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 based on the representative account 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. Portfolio composition is shown as of a point in time and is subject to change without notice.
©2022 Miller Value Partners, LLC
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