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Feb 22, 2023

Opportunity Equity Update for Week Ended 2/17/23

William Keenan

Silvergate and Coinbase Follow Bitcoin Prices Higher While Ovintiv Follows Commodity Prices Lower

Last week, the Opportunity Equity Strategy's representative account gained 0.99%, outperforming the S&P 500’s -0.20% decline. (Exhibit 1). The strategy ended the week up 19.44% YTD, 1,294 basis points ahead of the S&P 500.

Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 2/17/231

Time Period Opportunity Equity Representative Account S&P 500
Last Week (2/10 - 2/17) 0.99% -0.20%
MTD -1.21% 0.20%
QTD 19.44% 6.50%
YTD 19.44% 6.50%
1 Year -18.79% -5.29%
5 Year 4.02% 10.27%
10 Year 10.04% 12.52%
Inception (annualized since 6/26/00) 6.55% 6.68%

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

Silvergate Capital Corporation (SI) rose above the 50-day moving average while Coinbase Global, Inc. (COIN) rose above the 200-day moving average following bitcoin prices higher over the course of the week. Filings revealed that Citadel Securities had acquired a 5.5% stake in Silvergate, up from 0.4% at the end of 4Q 2022. A lawsuit filed in Northern California US District Court named CEO Alan Lane as a defendant, alleging that Lane aided and abetted fraudulent activities at Sam Bankman-Fried’s FTX. Moody’s downgraded Silvergate Bank’s deposit ratings to Ba3 from Ba1, maintaining its negative outlook. DA Davidson downgraded Coinbase to Neutral citing the SEC taking “a more combative stance on crypto,” but still increasing its price target to $60 from $55 (-12% downside). Compass Point upgraded the shares to neutral from buy, raising its price target to $100 from $75 (47% upside), while Barclays raised its price target to $57 from $45 (-16% downside).

General Motors Company (GM) entered into a supply agreement with US Steel for its new advanced and sustainable steel solution, verdeX. The new steel is manufactured with up to 75% fewer emissions compared to traditional blast furnace production and is made with 90% recycled content. Barclays initiated coverage on GM with an equal-weight rating and $46 price target (7% upside).

Norwegian Cruise Line Holdings Ltd. (NCLH) and Stitch Fix, Inc. (SFIX) rose on limited news.

Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 2/10/23 - 2/17/23

Name Type Net Return
Silvergate Capital Corporation Equity 25.0%
Coinbase Global, Inc Equity 14.2%
Norwegian Cruise Line Holding Ltd. Equity 8.6%
Stitch Fix, Inc. Equity 20.3%
General Motors Company Equity 4.4%

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

Ovintiv Inc. (OVV) followed commodity prices lower over the course of the week. Citi lowered its price target to $55 from $66 (21% upside).

Farfetch Limited’s (FTCH) fell through the 50-day moving average. Cowen lowered its price target to $7 from $8 (32% upside).

Alibaba Group Holding Limited (BABA) fell through the 50-day moving average.

Capital One Financial Corporation (COF) fell after the company reported a monthly credit card delinquency rate of 3.65%, up +1.25% y/y, higher than last month of +1.21% y/y and November at +1.19%. Delinquencies were up 0.22% m/m, more than the 0.11% m/m average seen during January 2012-2019, reflecting normalization and loan seasoning. Card net charge-offs (NCOs) in January were 3.81%, up +1.78% y/y, down slightly from +1.81% y/y in December and up from +1.48% y/y in November. Credit card loan balances were $130B (up 21.4% y/y), slightly above +21.0% y/y in December and +21.2% y/y in November. In auto lending, the delinquency rate was 5.72% (up 1.30% y/y), in line with +1.30% y/y last month and +1.44% y/y in November. Auto lending NCOs were 1.85%, up 0.86% y/y, down from +1.05% y/y in December and +1.21% y/y in November.

Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 2/10/23 - 2/17/23

Name Type Net Return
Ovintiv Inc. Equity -10.9%
Farfetch Limited Equity -9.0%
*New Security* Equity -17.3%
Alibaba Group Holding Limited Equity -3.5%
Capital One Financial Corporation Equity -3.7%

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. 

©2023 Miller Value Partners, LLC