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Oct 04, 2022

Opportunity Equity Update for Week Ended 9/30/22

Christina Siegel Malbon

Ovintiv Follows Commodity Prices Higher While NCLH Falls in Sympathy with Carnival

Last week, the Opportunity Equity strategy fell -2.48%, outperforming the S&P 500’s -2.88% decline. (Exhibit 1). The strategy ended the week down -37.21% YTD, 1,334 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 9/30/221

Time Period Opportunity Equity S&P 500
Last Week (9/23 - 9/30) -2.48% -2.88%
MTD -13.98% -9.21%
QTD -4.32% -4.88%
YTD -37.21% -23.87%
Inception (annualized since 6/26/00) 5.72% 6.15%

Source: Bloomberg, Miller Value Partners

Ovintiv Inc (OVV) and Energy Transfer LP (ET) followed energy prices higher over the week with Energy Transfer crossing above the 200-day moving average. Ovintiv announced the approval for the renewal of its share buy-back program to purchase up to 24.9M shares (~10% of shares outstanding) by October 2023. Capital One lowered its price target to $103 from $108 (124% upside), while Barclays raised its price target to $78 from $75 (70% upside).

Teva Pharmaceutical Industries Limited (TEVA) rose after announcing it had reached a $3.35M settlement with the State of Georgia over price fixing claims. PureTech Health (PRTC) rose above the 50 and 200-day moving averages. Expedia Group, Inc. (EXPE) rose on limited news.

Exhibit 2: Significant Contributors to Performance, 9/23/22 - 9/30/22

Name Type Return
Ovintiv Inc Equity 7.9%
PureTech Health PLC Equity 17.5%
Energy Transfer LP Equity 4.6%
Expedia Group Inc Equity 2.7%
Teva Pharmaceutical Industries Limited Equity 2.2%

Source: Miller Value Partners

Norwegian Cruise Line Holdings Ltd. (NCLH) fell below the 50-day moving average after Carnival Corporation’s (CCL) 3Q results missed expectations and 4Q22 guidance was well short of expectations with EBITDA guided for breakeven to slightly negative vs expectations for $606M due to lower-than-expected occupancy and higher marketing expenses. Citi initiated on Farfetch Ltd (FTCH) with a sell rating and a price target of $6 (19% downside) despite describing the company as a best-in-class technology. The company closed its $400M term loan at the high end of the pre-announced range at SOFR+625bps with a 0.5% floor and a 93.5 original issue discount (vs 95.0 desired)

General Motors Co (GM) announced it would invest $760M to retool its Toledo, Ohio plant to make drive units for future GM EV trucks. The company also announced the execution of a joint research development agreement with OneD Battery Sciences focused on the potential use of OneD’s silicon nanotechnology in GM’s Ultium battery cells to drive significant increases in energy density for longer range and reduced costs.

Citigroup Inc. (C) announced it had hired former co-head of global banking at Credit Suisse Jens Welter to co-head its European investment banking business and chair its consumer and retail advisory business. Mattel, Inc. (MAT) fell on limited news.

Exhibit 3: Significant Detractors from Performance, 9/23/22 - 9/30/22

Name Type Return
Norwegian Cruise Line Holdings Ltd. Equity -16.2%
Farfetch Ltd Equity -13.1%
General Motors Co Equity -9.6%
Mattel Inc Equity -4.8%
Citigroup Inc Equity -5.9%

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