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Aug 09, 2021

Opportunity Equity Update for Week Ended 8/6/21

Christina Siegel Malbon

Tupperware Rises on Strong Results, While ADT Falls On Continued Growth Spend.

Last week, the Opportunity Equity strategy fell -0.02%, underperforming the S&P 500’s 0.96% gain. (Exhibit 1). The strategy ended the week up 14.25% YTD, 487 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 8/6/211

Time Period Opportunity Equity S&P 500
Last Week (7/30 - 8/6) -0.02% 0.96%
MTD -0.02% 0.96%
QTD -6.00% 3.36%
YTD 14.25% 19.12%
Inception (annualized since 6/26/00) 9.25% 7.49%

Source: Bloomberg, Miller Value Partners

Tupperware Brands Corp (TUP) rose through the 50-day moving average as the company posted quarterly results that beat expectations. Sales were $465mm, above consensus of $460mm. Operating profit came in at $75.9mm vs consensus of $55.2mm with EPS of $0.95 beating estimates for $0.57. The company continues to make progress on its transition story focusing on new growth areas and improving efficiencies. DA Davidson raised their price target from $38 to $41.50 (upside of 73.2%). Green Thumb Industries (GTBIF) rose through the 50-day and 100-day moving average as the company announced the acquisition of Mobley Pain Management and Wellness Center, which is a vertically integrated cannabis entity in Rhode Island. The agreement gives Green Thumb a foothold in an additional state. DXC Technology (DXC) posted results that were slightly above expectations with sales of $4.14bn vs. estimates for $4.13bn. EPS came in at $0.84, handily above estimates of $0.75. The company posted their fifth consecutive quarter with book to bill >1x at 1.12x. The company reaffirmed their FY22 and FY24 outlook. RBC raised their price target from $42 to $47 (upside of 14.4%), while Citi increased their price target from $44 to $49 (upside of 19.3%), and JP Morgan increased their price target from $38 to $42 (upside of 2.2%). Teva Pharmaceutical (TEVA) crossed above the 50-day moving average as the market became more positive on the potential for an opioid settlement. Norwegian Cruise Line Holdings (NCLH) gained after reporting 2Q results that were slightly better than consensus with EPS coming in at -$1.93 vs -$1.97 expected but cash burn came in above guidance at $200mm and is expected to increase sequentially to $285mn in 3Q as part of the relaunch. Bookings for 2022 remain ahead of record levels from 2019. The company expects 40% of its fleet to be operational by the end of the 3rd quarter with 75% by the end of the year, and the full fleet operational by April 1st. JPM dropped their price target to $37 from $38 (upside of 48.7%), while Stifel dropped their target from $40 to $35 (upside of 40.6%).

Exhibit 2: Significant Contributors to Performance, 7/30/21 - 8/6/21

Name Type Return
Tupperware Brands Corp. Equity 13.2%
Green Thumb Industries Equity 10.0%
DXC Technology Equity 2.8%
Teva Pharmaceutical-SP ADR Equity 3.7%
Norwegian Cruise Line Holdings Ltd. Equity 3.6%

Source: Miller Value Partners

ADT Inc. (ADT) fell through the 100-day moving averages as the company reported quarterly earnings. Revenues came in at $1.304bn against consensus of $1.288bn, with adjusted EBITDA of $542 ahead of expectations for $538mm. Recurring monthly revenue additions (RMR) increased 28% YoY with Commercial showing 23% growth YoY. The company reiterated full year guidance but noted that they would expect to be at the lower end of their free cash flow guidance range ($450M-$550M) if they continued to spend on new customer growth like they have during the first half of the year. Quotient Technology Inc. (QUOT) reported 2Q21 results with revenue of $123.9mm slightly above consensus of $122.1mm but EBITDA of $4.33mm drastically below expectations of $8.38mm. The company provided full year guidance with revenue of $505-$522mm (vs consensus of $523mm) and adjusted EBITDA of $50-65mm (vs consensus of $59mm). Craig Hallum lowered their price target from $25 to $18 (upside of 120.8%). Stitch Fix (SFIX) dropped through the 100-day moving average. Wells Fargo wrote a report reiterating their underweight rating given the slower web traffic and engagement trends they are tracking on the company as well as their expectations for a delay in the launch of Direct Buy. Tivity Health Inc. (TVTY) fell through the 100-day moving average on quarterly results. The company posted revenue of $120.1mm ahead of consensus of $111.8mm, adjusted EBITDA of $41.5mm vs $36.3mm expected and adjusted EPS was $0.48 vs $0.36 expected. The company disclosed that UnitedHealth Group will remove half their eligible lives from the platform in 2022, which is nearly $20mm in annualized revenue. Cantor Fitzgerald lowered their price target to $33 from $36 (upside of 44.5%), while Piper Sandler lowered their target from $27 to $25 (upside of 9.5%). Bausch Health Companies Inc. (BHC) fell below the 200-day moving average as the company reported earnings. Revenue was $2.1bn in-line with consensus with EBITDA coming in at $826mm beating consensus of $795mm. The company lowered yearly revenue guidance from $8.6-$8.8bn down to $8.4-$8.6bn, due to the sale of Amoun Pharma. The company announced it plans to pursue the IPO of the Solta Medical Business, which is their medical aesthetics business. Piper Sandler lowered their price target from $33 to $30 (upside of 12.5%), while Barclays lowered their target from $35 to $31 (upside of 16.2%).

Exhibit 3: Significant Detractors from Performance, 7/30/21 - 8/6/21

Name Type Return
ADT Inc. Equity -11.5%
Quotient Technology Inc. Equity -25.0%
Stitch Fix, Inc. Equity -14.7%
Tivity Health Inc. Equity -9.0%
Bausch Health Companies Inc. Equity -8.8%

-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.

©2020 Miller Value Partners, LLC