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Aug 26, 2021

Opportunity Equity Update for Week Ended 8/20/21

Christina Siegel Malbon

Grayscale Gains on Bitcoin Rise, While DXC Falls on Downgrade

Last week, the Opportunity Equity strategy fell -6.40%, underperforming the S&P 500’s -0.55% loss. (Exhibit 1). The strategy ended the week up 3.96% YTD, 1,540 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 8/20/211

Time Period Opportunity Equity S&P 500
Last Week (8/13 - 8/20) -6.40% -0.55%
MTD -9.03% 1.16%
QTD -14.47% 3.56%
YTD 3.96% 19.36%
Inception (annualized since 6/26/00) 8.75% 7.48%

Source: Bloomberg, Miller Value Partners

The Grayscale Bitcoin Trust (GBTC) rose on news that Coinbase received approval from their Board of Directors to invest $500mm of the company’s balance sheet into Bitcoin. Wells Fargo also became the latest bank to register a private Bitcoin fund to serve their wealthy clients, as adoption of the cryptocurrency space continues. There was limited news on Bausch Health Companies (BHC), Vontier Corp. (VNT), Pangea One L.P., and GTY Technology Holdings Inc. (GTYHW).

Exhibit 2: Significant Contributors to Performance, 8/13/21 - 8/20/21

Name Type Return
Grayscale Bitcoin Trust Currency 3.1%
Bausch Health Companies Inc. Equity 1.5%
Vontier Corp. Equity 0.6%
Pangea One, L.P. Equity 0.6%
GTY Technology Holdings Inc. Derivative 13.2%

Source: Miller Value Partners

DXC Technology (DXC) dropped through the 50-day and 100-day moving average as JP Morgan put out a report that downgraded the stock to Underweight from Neutral based on modest net free cash flow over the medium term. The report increased the price target from $42 to $45 (upside of 27.0%). The company named Chis Drumgoole as their new Chief Operating Officer, elevating him from Chief Information Officer, a position he has held with the company since March of 2020. Alibaba Group Holding Ltd. (BABA) continued to decline after Tencent Holdings warned investors to brace for more regulatory curbs on China’s tech sector. Piper Sandler downgraded Vroom, Inc. (VRM) from overweight to Neutral and dropped their price target from $54 to $30 (upside of 19.9%) based on concerns over increased spending initiatives. JP Morgan lowered their target from $60 to $55 (upside of 119.8%) but maintained their overweight position. Farfetch Ltd. (FTCH) declined after announcing 2Q results, which beat expectations. The company reported revenue of $523.3mm against expectations for $496.8mm and adjusted EBITDA of -$20.6mm vs -$23.1mm expected. The beat was largely overshadowed by the fact that Digital Platform GMV growth came in at the low end of guidance (40% vs 40-45% guide) and Digital Platform Contribution Margin came in at the low-end of guidance (34% vs 34-36% guide) as a result of increased shipping costs and duties related to Brexit which were not passed onto consumers. As a result, the company is working to move their distribution center to the Netherlands. The company maintained full year guidance for Digital GMV growth of 35-40% and adjusted EBITDA of 1-2% (vs consensus of -0.6%). Goldman Sachs lowered their price target from $71 to $68 (upside of 75.3%), and Credit Suisse lowered their target from $84 to $80 (upside of 106.2%) among others. General Motors Co. (GM) dropped through the 200-day moving average. The company announced that they are extending shutdowns of several North American factories due to the continued computer-chip shortage. The company expanded the recall on the Chevrolet Bolt over the weekend extending it to include newer models. The Chevy Bolt uses an LG battery, not the new GM/LG Ultium Battery Platform.

Exhibit 3: Significant Detractors from Performance, 8/13/21 - 8/20/21

Name Type Return
DXC Technology Co. Equity -14.0%
Alibaba Group Holding Ltd. ADS Equity -16.1%
Vroom, Inc. Equity -16.7%
Farfetch Ltd. Equity -12.2%
General Motors Co. Equity -9.0%

-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.

©2021 Miller Value Partners, LLC