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Nov 22, 2021

Opportunity Equity Update for Week Ended 11/19/21

Christina Siegel Malbon

Matterport Gains on Increased Visibility while Farfetch Falls on Earnings

Last week, the Opportunity Equity strategy lost 5.04%, underperforming the S&P 500’s 0.36% return. (Exhibit 1). The strategy ended the week up 6.77% YTD, 1,990 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 11/19/211

Time Period Opportunity Equity S&P 500
Last Week (11/12 - 11/19) -5.04% 0.36%
MTD 0.15% 2.12%
QTD 2.23% 9.27%
YTD 6.77% 26.67%
Inception (annualized since 6/26/00) 8.78% 7.69%

Source: Bloomberg, Miller Value Partners

Matterport (MTTR) and other Metaverse-linked names jumped alongside Meta Platforms (FB). Additionally, Tiger Global disclosed a new 7.5M position in the stock. (JD) reported Q3 revenue of Rmb 218.7Bn, +25.5% Y/Y and ahead of consensus by 1.5% on healthy user growth of 25% to 552M. Retail EBIT margins of 4.0% topped estimates of 3.5% while group net profit of Rmb $5Bn came in well ahead of estimates of Rmb 3.3Bn. Management expects Q4 retail revenue to maintain growth momentum seen in Q3 (+23%), driven by user growth with margins slightly better than 4Q20 (1.9%). Securities of Amazon (AMZN) gained as October retail sales increased +1.7% M/M, topping estimates of 1.0%. Taylor Morrison Home Corp (TMHC) announced a new land banking facility joint venture with Varde partners, further enhancing the firm’s asset-light land strategy.

Exhibit 2: Significant Contributors to Performance, 11/12/21 - 11/19/21

Name Type Return
Matterport Inc. Equity 25.6%
JD 1/24 C75 Derivative 15.0%
AMZN C3050 1/23 Derivative 16.3% Inc Equity 4.3%
Taylor Morrison Home Corp Equity 3.0%

Source: Miller Value Partners

Splunk (SPLK) fell below closely watched technical levels on news CEO Doug Merritt is stepping down. Additionally, the company disclosed preliminary Q3 results in-line to slightly better than consensus, including cloud ARR of $1.1Bn (+75% Y/Y), total ARR of $2.8Bn (+37% Y/Y), total revenue of $660M (+19% Y/Y), and operating margins of -14%. Green Thumb Industries (GTBIF) fell below its 50-day moving average. Alibaba (BABA) reported fiscal Q2 revenue of Rmb 200.7Bn, +29% Y/Y and 3% below consensus, driven by slowing macro and lower-than-expected monetization on account merchant support. EPS of Rmb 11.2 missed estimates by 9% while EBITA of Rmb 28Bn dropped 32% on pressures from the high-margin China retail marketplace and continued investment in new initiatives. Management now expects full year topline growth of 20%-23%, implying revenue of Rmb 872Bn (down from Rmb 930Bn). Farfetch (FTCH) reported Q3 GMV of $1.014Bn, +23% Y/Y and below guidance of 30% and consensus of 31%. EBITDA of $5.3Bn also missed guidance of $10M and estimates of $6.9M driven by lower than expected digital platform order contribution margin, which declined 1,000bps Y/Y to 26.6% due to higher demand generation expenses. Management initiated Q4 guidance of 18%-22% growth in digital platform GMV, implying $1.127Bn at the midpoint (vs consensus of $1.223Bn) and EBITDA of $40M (vs consensus of $44M). For FY21, management sees digital GMV growth of 33% (from 35%-40%) and EBITDA of $5M (from $10M). Norwegian Cruise Line Holdings (NCLH) announced a refinancing transaction, issuing $1Bn of new 1.125% exchangeable notes due 2027 and raising another $1.1Bn through the sale of 46.8M new shares at $23.64. Proceeds are being used to redeem up to $1.215Bn of debt with a blended interest rate of 8.1%, implying annual interest savings of $88M.

Exhibit 3: Significant Detractors from Performance, 11/12/21 - 11/19/21

Name Type Return
Splunk Inc Equity -21.1%
Green Thumb Industries Inc. Equity -20.4%
Alibaba Group Holding Ltd. ADS Equity -15.9%
Farfetch Ltd Equity -14.7%
Norwegian Cruise Line Holdings Ltd. Equity -9.9%

-Source: Miller Value Partners

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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.

©2021 Miller Value Partners, LLC