Opportunity Equity Weekly Updates
January 11, 2021
Opportunity Equity Update for Week Ended 1/8/21
DXC Rises on Takeover Approach, while Genworth Tumbles on Missed Merger Deadline
Last week, the Opportunity Equity strategy gained 4.60%, outperforming the S&P 500’s 1.88% gain (Exhibit 1). The strategy ended the week up 4.60% YTD, 272 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 1/8/211
|Time Period||Opportunity Equity||S&P 500|
|Last Week (12/31 – 1/8)||4.60%||1.88%|
|Inception (annualized since 6/26/00)||9.05%||6.89%|
Source: Bloomberg, Miller Value Partners
Desktop Metal Inc. (DM) rose sharply as Benchmark Securities initiated on the name with a buy rating and a price target of $28 (upside of 34.7%). DXC Technology Company (DXC) gained after Atos made a $10bn friendly takeover approach, which implies an equity value of $29, 10% above where it was trading pre-announcement. Earlier in the week the company was downgraded by BofA to underperform with a price target of $24 (downside of 18.9%) after the recent run up in the stock. Piper Sandler raised their price target on The RealReal (REAL) to $25 from $19 (upside of 2%) while Stifel downgraded the stock to a hold rating and a price target of $22 (10.2% downside) due to the sharp run up in the stock over the past month. Uber Technologies (UBER) benefited from a series of price target increases to open the new year. Deutsche Bank increased their price target to $80 from $54 (upside of 50.2%) while BTIG moved their target from $65 to $70 (upside of 31.4%) along with Oppenheimer who raised their price target from $47 to $62 (upside of 16.4%). ADT Inc. (ADT) crossed above the 100-day moving average on limited news.
Exhibit 2: Significant Contributors to Performance, 12/31/20 – 1/8/21
|Desktop Metal Inc.||Equity||18.3%|
|DXC Technology Company||Equity||15.0%|
|The RealReal, Inc.||Equity||25.4%|
|Uber C32 1/22||Derivative||9.9%|
Source: Miller Value Partners
Genworth Financial (GNW) dropped sharply as the 12/31/20 deadline to complete their proposed merger with China Oceanwide was missed and not extended. While the merger has not been terminated, the company does not believe closing can take place in the near term. The company is pivoting toward strategic alternatives to meet the $1bn of debt due in 2021 and will consider whatever options are available. The stock also dropped through the 100-day and 200-day moving averages on the news. Precigen Inc. (PGEN) fell despite news that the company achieved FDA approval for a Phase I study of PRGN-2012, a drug to treat a rare Respiratory Papillomatosis disorder. Taylor Morrison Home Corp (TMHC) dropped through the 50-day and 100-day moving averages as RBC dropped their price target from $31 to $27 (upside of 12.5%) on fear that their community housing positioning will limit growth relative to competitors. Farfetch Ltd. (FTCH) and Stitch Fix, Inc. (SFIX) dropped on limited news.
Exhibit 3: Significant Detractors from Performance, 12/31/20 – 1/8/21
|Genworth Financial Inc||Equity||-26.2%|
|Stitch Fix, Inc.||Equity||-5.4%|
|Taylor Morrison Home Corp||Equity||-6.4%|
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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