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Mar 09, 2021

Opportunity Equity Update for Week Ended 3/5/21

Christina Siegel Malbon

Diamondback Energy Surges with Energy Prices, while Vroom Falls on Earnings Disappointment

Last week, the Opportunity Equity strategy gained 0.94%, outperforming the S&P 500’s 0.84% rise (Exhibit 1). The strategy ended the week up 17.27% YTD, 1,470 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/5/211

Time Period Opportunity Equity S&P 500
Last Week (2/26 - 3/5) 0.94% 0.84%
MTD 0.94% 0.84%
QTD 17.27% 2.57%
YTD 17.27% 2.57%
Inception (annualized since 6/26/00) 9.59% 6.87%

Source: Bloomberg, Miller Value Partners

Diamondback Energy (FANG) rose as oil prices surged following OPECs decision to extend most of their current production cuts through April. Rocket Companies (RKT) had a strong week following a strong earnings report the previous week. The stock saw a 74% rise in its price on Tuesday as analysts speculated that retail/Reddit activity was responsible for the move. RBC cut the stock to sector perform while keeping their price target at $30 (upside of 19.5%) on the move. There was minimal news on Discovery Inc. (DISCA), WW International Inc. (WW), and OneMain Holdings Inc. (OMF).

Exhibit 2: Significant Contributors to Performance, 2/26/21 - 3/5/21

Name Type Return
Diamondback Energy Inc. Equity 23.8%
Rocket Companies Inc. Equity 17.4%
Discovery Inc. Equity 21.2%
WW International Inc. Equity 18.7%
OneMain Holdings Inc. Equity 12.3%

Source: Miller Value Partners

Vroom Inc. (VRM) fell below the 50-day and 100-day moving average after the company announced 4Q results. The company reported revenue of $405.8mm ahead of consensus of 401.8mm but disappointed on gross profit with gross profit coming in below guidance at $20.1mm vs $24-$28mm guided for and consensus of $27mm. The company blamed the learning curve in sales support leading to an increase in aged inventory as the problem during the period which they expect to have corrected by mid-year. The company guided at the midpoint for revenue of $514.5mm below consensus of $520.5mm and EBITDA of-$84mm vs -$44.4m expected. Jeffries dropped their price target from $45 to $43 (upside of 34.5%), while Truist dropped their price target from $58 to $54 (upside of 68.9%), and Stifel dropped their target from $65 to $55 (upside of 72.0%). Ziopharm Oncology (ZIOP) fell over the week following a strong move up the previous week after announcing 4Q results and leadership change. The company announced that Heidi Hagen had been appointed interim Chief Executive Officers replacing Dr. Laurence Cooper while the company searches for a permanent replacement. James Huang was also appointed executive chairman. H.C. Wainwright downgraded the stock to neutral. Farfetch Ltd (FTCH) dropped through the 50-day moving average while Desktop Metal (DM) fell below the 100-day moving average on limited news.

Exhibit 3: Significant Detractors from Performance, 2/26/21 - 3/5/21

Name Type Return
Desktop Metal Inc. Equity -21.8%
Vroom, Inc. Equity -24.6%
Farfetch Ltd. Equity -15.7%
*New Security* Equity -30.3%
Ziopharm Oncology Inc. Equity -19.5%

Source: Miller Value Partners

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

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.

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