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Jul 06, 2021

Opportunity Equity Update for Week Ended 7/2/21

Christina Siegel Malbon

Facebook Rises on FTC Complaint Dismissal, While Acuity Brands Falls on Market Guidance

Last week, the Opportunity Equity strategy fell -1.07%, underperforming the S&P 500’s 1.71% increase (Exhibit 1). The strategy ended the week up 22.30% YTD, 555 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 7/2/211

Time Period Opportunity Equity S&P 500
Last Week (6/25 - 7/2) -1.07% 1.71%
MTD 0.62% 1.30%
QTD 0.62% 1.30%
YTD 22.30% 16.75%
Inception (annualized since 6/26/00) 9.65% 7.2%

Source: Bloomberg, Miller Value Partners

The US District Court for the District of Columbia granted Facebook Inc.’s (FB) Motion to Dismiss the Compliant brought by the FTC but did not dismiss the antitrust case. The court also dismissed the entire antitrust case brought by the State AGs. While there will still be some continuing regulatory action against the company, the dismissal reduces the risk of Facebook having to divest assets in the future due to the high hurdle regulators will need to clear. Bank of America raised their price target from $390 to $400 (upside of 12.8%), while Argus Research moved their target up to $410 from $385 (upside of 15.6%). Inc. (AMZN) asked the FTC to have Chairwoman Lina Khan recuse herself from matters regarding the company due to previous negative statements she has made. There was limited news on DXC Technology Company (DXC) and WW International Inc. (WW).

Exhibit 2: Significant Contributors to Performance, 6/25/21 - 7/2/21

Name Type Return
DXC Technology Company Equity 2.7%
AMZN C3050 1/23 Derivative 10.0%
Facebook Inc Equity 3.9% Inc Equity 3.2%
WW International Inc Equity 2.9%

Source: Miller Value Partners

Acuity Brands Inc. (AYI) fell through the 50-day moving average as the company announced their 3Q21 results and held an investor day. The company posted revenue of $899.7mm beating consensus of $839.8mm. The non-GAAP gross margin of 43% came in over expectations for 42.4% and was up 80bps YoY. Adjusted EPS also beat, coming in at $2.77 vs. estimates of $2.27. The company provided long-term guidance with expectations for the Acuity Brand Lighting and Lighting Controls (ABL) business to grow topline at mid-single-digits and for the Intelligent Spaces Group (ISG) to grow their topline at mid-double-digits. The company guided to 42% gross margins but did not provide guidance on operating margins. The company also signaled that they will increase their M&A activity, as the company works to increase their scale. Credit Suisse increased their price target from $206 to $211 (upside of 18.1%), while Baird raised their price target from $196 to $220 (upside of 23.1%). Alibaba Group Holding (BABA) fell through the 50-day moving average as concerns continued to percolate around Chinese regulation of technology companies.  Desktop Metal (DM) filed to sell $2.49mm shares from existing shareholders. Teva Pharmaceutical (TEVA) fell as the New York opioid trial began. The trial is expected to impact the scope of the potential opioid liability for each defendant on a national level. Norwegian Cruise Line Holdings Ltd. (NCLH) fell through the 50-day and 100-day moving average on limited news.

Exhibit 3: Significant Detractors from Performance, 6/25/21 - 7/2/21

Name Type Return
Norwegian Cruise Line Holdings Ltd. Equity -6.5%
Acuity Brands, Inc. Equity -7.4%
Alibaba Group Holding Ltd. ADS Equity -4.7%
Desktop Metal Inc. Equity -9.4%
Teva Pharmaceutical Equity -5.1%

-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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