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Apr 26, 2022

Opportunity Equity Update for Week Ended 4/22/22

Christina Siegel Malbon

Delta Gains on Earnings Momentum While Teva Falls on FDA Ruling

Last week, the Opportunity Equity strategy fell by -4.78%, underperforming the S&P 500’s  -2.74% loss. (Exhibit 1). The strategy ended the week down -14.45% YTD, 446 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 4/22/221

Time Period Opportunity Equity S&P 500
Last Week (4/14 - 4/22) -4.78% -2.74%
MTD -8.02% -5.65%
QTD -8.02% -5.65%
YTD -14.45% -9.99%
Inception (annualized since 6/26/00) 7.35% 7.10%

Source: Bloomberg, Miller Value Partners

Delta Air Lines Inc (DAL) continued to rise in tandem with strong results and commentary from both United Airlines and American Airlines, who are also seeing extremely strong demand for the summer travel season. United Airlines CEO Scott Kirby went so far as to say that demand is stronger than he has ever seen it in his career, which he expects to lead to the best total revenue per seat mile (TRASM) and quarterly revenue in the company’s history. JP Morgan raised its price target to $70 from $69 (60% upside). Mattel Inc (MAT) rose through the 100-day moving in sympathy with strong results reported by Hasbro which significantly exceeded consensus expectations. Management raised its full-year EBIT target while maintaining its guidance to earn at least $6 per share in FY 2022. Hasbro continues to pursue a multi-media, multigenerational strategy built around its strong brands that is being replicated at Mattel. Our TLT Puts (TLT P143 1/19/24) follow rates marginally higher over the week. OneMain Holdings Inc (OMF) rose after the company reported its securitization data for Q1 2022, where net charge-offs and 30-day delinquencies tracked well below analyst estimates, helping to ease consumer credit concerns. There was limited news on Vontier Corp (VNT).

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

Name Type Return
Delta Air Lines Inc Equity 3.1%
Mattel Inc Equity 2.7%
Vontier Corp Equity 3.8%
OneMain Holdings Inc Equity 1.9%
TLT P143 1/24 Derivative 1.4%

Source: Miller Value Partners

Teva Pharmaceutical (TEVA) fell after the FDA issued a Complete Response Letter (CRL) delaying the company’s Risperidone injection treatment for Schizophrenia. Teva’s partner in the joint venture, Medincell, plans to “quickly” resolve the issue given the strong Phase III results. Goldman Sachs lowered its price target on Splunk Inc (SPLK) from $232 to $219 (77% upside). The company fell through the 50-day and 200-day moving averages over the week. Farfetch Ltd (FTCH) fell on re-opening fears in the wake of Netflix’s earnings shortfall along with Meta Platforms Inc (FB) which fell through the 50-day moving average. Credit Suisse cut its Meta price target to $272 from $336 (48% upside), while Citi raised its target from $258 to $300 (63% upside). Alibaba Group Holdings Ltd. ADS (BABA) fell in sympathy with the broader Chinese market on zero-covid policy lockdown fears. Morningstar cut its price target on the name from $188 to $179 (107% upside).

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

Name Type Return
Teva Pharmaceutical-SP ADR Equity -10.5%
Meta Platforms Inc Cl A Equity -12.1%
Splunk Inc Equity -10.3%
Farfetch Ltd Equity -15.5%
Alibaba Group Holding Ltd. ADS Equity -9.4%

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