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Mar 14, 2022

Opportunity Equity Update for Week Ended 3/11/22

Christina Siegel Malbon

TLT Puts Move Higher on Rising Rates While Farfetch Falls on Russian Exposure

Last week, the Opportunity Equity strategy fell -4.25%, underperforming the S&P 500’s -2.84% loss. (Exhibit 1). The strategy ended the week down -16.71% YTD, 518 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/11/221

Time Period Opportunity Equity S&P 500
Last Week (3/4 - 3/11) -4.25% -2.84%
MTD -8.94% -3.82%
QTD -16.71% -11.53%
YTD -16.71% -11.53%
Inception (annualized since 6/26/00) 7.26% 7.05%

Source: Bloomberg, Miller Value Partners

TLT P 143 1/24 (TLT) rose as rates climbed higher over the week reaching 2.35% on the 30-year. WW International Inc (WW) rose following the sharp decline post 4Q results that showed a weaker start to the key weight loss season than expected. S&P Global Rating lowered its issuer credit rating on WW to B from B+ and its senior secured debt to B+ from BB- due to increasing leverage. PureTech Health’s (PRTC) founded entity Akili holdings was named to Fast Company’s Annual List of the World’s 50 Most Innovative Companies for 2022. DXC Technology Company (DXC)rose despite being downgraded at Bank of America to Underperform due to geopolitical concerns with a price target of $30 (2% downside), down from $45. Credit Suisse raised their price target on Tivity Health Inc (TVTY) to $31 (2.5% upside), up from $29.

Exhibit 2: Significant Contributors to Performance, 3/4/22 - 3/11/22

Name Type Return
TLT P143 1/24 Derivative 14.2%
WW International Inc Equity 8.0%
PureTech Health PLC Equity 8.9%
DXC Technology Company Equity 1.9%
Tivity Health Inc Equity 1.5%

Source: Miller Value Partners

JD 1/24 C75 (JD) and Alibaba Group Holding Ltd. (BABA) fell in sympathy with the broader selloff in Chinese equities after the SEC put forward a list of five Chinese companies that could be delisted if they don’t measure up to US accounting standards. JD reported Q4 results that beat consensus. Q4 revenues rose 23% y/y to Rmb275.9B, slightly ahead of expectations of Rmb274.9b while non-GAAP Net Income hit Rmb3.57B ahead of consensus of Rmb2.56B. Citi lowered their price target to $99 (106% upside) from $109 while Nomura lowered their price target to $85 (77% upside) from $90. Farfetch Ltd (FTCH) declined due to concerns around their business exposure to both Russia and China. Russia made up 6% of GMV in 2021 while China is estimated to have made up low-teens percent of GMV. The company noted in their 20-F filing that sanctions are expected to “significantly impact” its operations in Russia. Taylor Morrison Home Corp (TMHC) fell through its 50 day and 100-day moving averages as JPMorgan lowered their price target on the name to $40 (upside of 33%) from $49.50 while maintaining an overweight rating. Mattel Inc (MAT) fell through its 50-day moving average on limited news.

Exhibit 3: Significant Detractors from Performance, 3/4/22 - 3/11/22

Name Type Return
JD 1/24 C75 Derivative -44.2%
Alibaba Group Holding Ltd. ADS Equity -13.7%
Farfetch Ltd Equity -21.5%
Mattel Inc. Equity -6.8%
Taylor Morrison Home Corp Equity -6.9%

Source: Miller Value Partners

Check out the Income Strategy weekly Update. Click to Read.

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 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. Portfolio composition is shown as of a point in time and is subject to change without notice.

©2022 Miller Value Partners, LLC