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Apr 19, 2022

Opportunity Equity Update for Week Ended 4/14/22

Christina Siegel Malbon

Delta Gains on Lower Loss While Alphabet Falls on Higher CapEx Guidance

Last week, the Opportunity Equity strategy fell by -0.16%, outperforming the S&P 500’s -2.11% loss. (Exhibit 1). The strategy ended the week down -10.15% YTD, 270 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 4/14/221

Time Period Opportunity Equity S&P 500
Last Week (4/8 - 4/14) -0.16% -2.11%
MTD -3.41% -2.99%
QTD -3.41% -2.99%
YTD -10.15% -7.45%
Inception (annualized since 6/26/00) 7.60% 7.24%

Source: Bloomberg, Miller Value Partners

Delta Air Lines Inc (DAL) rose through the 50, 100, and 200-day moving averages after the company reported a better than expected loss of -$1.23 vs. consensus estimates of -$1.30, revenues also came in ahead of expectations at $8.16B vs. the $8.12B expected, and most notably the company was cash-neutral in the quarter, generating $197M of FCF against consensus estimates of -$399M. The company guided to 2Q22 Revenue to be at 93-97% recovered vs 2019 levels with EBIT margins hitting in the 12-14% range well ahead of consensus expectations with EBIT margins expected to be 5%. Norwegian Cruise Line Holdings Ltd. (NCLH) rose through the 50 and 100-day moving averages following the launch of its previously announced Non-Fungible Token (NFT) marketplace. Our TLT Puts (TLT P143 1/19/24) rose over the week as rates continued their upward march. Goldman Sachs lowered their price target on Splunk Inc (SPLK) from $232 to $219 (59% upside), while JP Morgan and B. Riley cut their price targets on Taylor Morrison Home Corp (TMHC) to $30 (12% upside) and $36 (34% upside).

Exhibit 2: Significant Contributors to Performance, 4/8/22 - 4/14/22

Name Type Return
Delta Air Lines Inc Equity 15.3%
Norwegian Cruise Line Holdings Ltd. Equity 8.5%
TLT P143 1/24 Derivative 13.1%
Splunk Inc Equity 3.9%
Taylor Morrison Home Corp Equity 3.8%

Source: Miller Value Partners

Alibaba Group Holdings Ltd. ADS (BABA) fell after UBS cut its price target on the name to $140 from $150 (47% upside). Alphabet Inc (GOOGL) announced it would spend $9.5B in CapEx in 2022, up from $7B last year, specifically in domestic data centers and office buildings. Mizuho lowered its price target on Coinbase Global Inc Ordinary Shares (COIN) to $150 from $190, maintaining its neutral rating (2% upside). RBC Capital cut its price target on Meta Platforms Inc Cl A (FB) to $240 from $245 (16% upside) There was limited news on Green Thumb Industries Inc. (GTBIF).

Exhibit 3: Significant Detractors from Performance, 4/8/22 - 4/14/22

Name Type Return
Alibaba Group Holdings Ltd. ADS Equity -7.8%
Alphabet Inc Equity -4.9%
Coinbase Global Inc Ordinary Shares Equity -8.5%
Green Thumb Industries Inc. Equity -5.9%
Meta Platforms Inc Cl A Equity -5.5%

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