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Jun 01, 2021

Opportunity Equity Update for Week Ended 5/28/21

Christina Siegel Malbon

Farfetch Gains on New CEO Compensation Plan, While Teva Falls Despite Licensing Agreement

Last week, the Opportunity Equity strategy gained 4.19%, outperforming the S&P 500’s 1.20% increase (Exhibit 1). The strategy ended the week up 20.08% YTD, 746 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 5/28/211

Time Period Opportunity Equity S&P 500
Last Week (5/21 - 5/28) 4.19% 1.20%
MTD -0.70% 0.70%
QTD 3.37% 10.72%
YTD 20.08% 12.62%
Inception (annualized since 6/26/00) 9.60% 7.27%

Source: Bloomberg, Miller Value Partners

Farfetch Ltd. (FTCH) gained over the week after the company disclosed a new compensation plan for CEO, Jose Neves. Under the new plan, Jose has waved his salary and annual bonus from 2021-2028 and instead has the potential to be awarded 8.44M Performance-Based Restricted Share Units (PSUs) if the company’s stock price over an eight-year period reaches certain hurdles. The price target hurdles implies returns of 11-24% annually over the eight-year period. Norwegian Cruise Line Holdings Ltd (NCLH) rose through the 50-day moving average as the company announced a plan for a return to cruising that covered 89% of the fleet, including a return to service in the United States. The plan calls for the company to get to 30% of the fleet in service by the end of 3Q, and 70% by the end of the year, with the goal of 100% resumption of sailing by the end of the first quarter of 2022. The RealReal Inc. (REAL) benefitted from comments made by CFO Matt Gustke where he stated that GMV growth guidance given for the year is likely to be conservative, and the company might be able to approach their longstanding $100 gross profit per order target by the end of FY 2021 instead of the previously communicated end of FY 2022. The company is also benefitting from the post-pandemic reopening in major US cities such as New York and Los Angeles. There was limited news on Stitch Fix (SFIX), which rose through the 200-day moving average.

Exhibit 2: Significant Contributors to Performance, 5/21/21 - 5/28/21

Name Type Return
*New Security* Equity 83.5%
Farfetch Ltd Equity 15.3%
Norwegian Cruise Line Holdings Ltd. Equity 11.1%
Stitch Fix, Inc. Equity 14.3%
The RealReal, Inc. Equity 15.9%

Source: Miller Value Partners

Teva Pharmaceutical SP ADR (TEVA) fell through the 50-day moving average. The company reached a deal with Ironwood Pharmaceuticals which grants them a license to sell a generic form of Linzess that does not start until 2029, subject to USDA approval.  Energy Transfer LP (ET) fell despite positive news that the Dakota Access Pipeline project will not be shut down while the Environmental Impact Statement by the US Army Core of Engineers is drawn up. Karuna Therapeutics (KRTX)) dropped through the 50-day and 100-day average despite Citi releasing a survey saying they believe there is an appetite for KarXT in Schizophrenia treatment among physicians, which would bode well for the company. Precigen Inc. (PGEN) announced the resignation of their Principal Accounting Officer and appointed an interim one while they continue their searches for both a new CFO and Principal Accounting Officer. There was limited news on Ziopharm Oncology Inc. (ZIOP).

Exhibit 3: Significant Detractors from Performance, 5/21/21 - 5/28/21

Name Type Return
Teva Pharmaceutical-SP ADR Equity -5.6%
Energy Transfer LP Equity -2.9%
Karuna Therapeutics Inc Equity -8.4%
Precigen Inc. Equity -2.9%
Ziopharm Oncology Inc Equity -3.5%

-Source: Miller Value Partners

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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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