December 14, 2020

Opportunity Equity Update for Week Ended 12/11/20

Stitch Fix Soars on Earnings Beat While WW Falls as Oprah Sells

Last week, the Opportunity Equity strategy gained 2.58%, outperforming the S&P 500’s -0.95% loss (Exhibit 1). The strategy ended the week up 36.25% YTD, 2,086 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 12/11/201

Time Period Opportunity Equity S&P 500
Last Week (12/4 – 12/11) 2.58% -0.95%
MTD 7.74% 1.21%
QTD 33.24% 9.30%
YTD 36.25% 15.39%
Inception (annualized since 6/26/00) 8.75% 6.68%

Source: Bloomberg, Miller Value Partners

Stitch Fix, Inc. (SFIX) soared on the release of their FY 2021 first quarter results. Revenue for the first quarter came in at $490mm, beating estimates of $481mm. Gross margin was higher than anticipated at 44.7% vs. expectations of 43.6% and adjusted net income coming in at $9.54mm vs. expectations for a -$18.5mm decline. The company provided stronger than expected full-year guidance, with revenues of $2.05-$2.14bn, relative to $2.01bn estimates. Stitch Fix finally announced their new CFO, Dan Jedda, who joins the company from The strong bout of news lead to multiple price target changes, with KeyBanc raising their target to $65 from $56, just after raising it from $36 (upside of 8.2%), RBC upping their target from $50 to $64 (upside of 6.6%), and Goldman Sachs increasing their target from $34 to $58 (downside of 3.4%). Desktop Metal Inc. (DM) gained as they completed their merger into the Trine Acquisition Corp SPAC and began trading under the new ticker of DM this week. Farfetch Ltd. (FTCH) gained as JPMorgan raised their price target to $68 from $62, upside of 13%, while BTIG increased their price target from $62 to $65 (upside of 8.2%). BTIG tracks proprietary clickstream data that they believe shows FTCH is tracking ahead of 4Q consensus estimates. OneMain Holdings Inc. (OMF) rose as Barclays raised their outlook to overweight with a price target of $63 (upside of 45.4%). The company upsized their 4% senior notes offering from $500m to $850m using the proceeds to lower their cost of debt by taking out their 7.75% senior notes due 2021. The company also disclosed that 30% of their loan book is now post-Covid-19 loans that have more conservative underwriting standards. Rocket Companies, Inc. (RKT) rose above the 50-day moving average on limited new.

Exhibit 2: Significant Contributors to Performance, 12/4/20 – 12/11/20

Name Type Return
Stitch Fix, Inc. Equity 68.9%
Desktop Metal Equity 50.8%
Farfetch Ltd. Equity 5.0%
OneMain Holidngs, Inc. Equity 7.4%
Rocket Companies, Inc. Equity 6.3%

Source: Miller Value Partners

WW International (WW) fell during the week despite DA Davidson increasing their price target form $33 to $38 (upside 30.9%). Oprah Winfrey sold some shares of the company in a 10b5 plan. KeyBanc increased their price target on Uber Technologies (UBER) to $60 from $50 (upside of 14%), while Mizuho increased their target to $63 from $50 (upside of 19.7%). The company announced the sale of ATG, their self-driving car unit, to Aurora for $4bn, while investing $400m in the business and holding a 26% share of the combined entity. DXC Technology Company (DXC) dropped despite a price target increase from JP Morgan, who increased their price target from $22 to $26 (upside of 8.7%). The company announced that SEG Automotive signed a 5-year outsourcing contract with the company. Acuity Brands Inc. (AYI) and Genworth Financial Inc. (GNW) dropped on limited news.

Exhibit 3: Significant Detractors from Performance, 12/4/20 – 12/11/20

Name Type Return
WW International Equity -11.4%
Uber C32 1/22 Derivative -6.3%
DXC Technology Company Equity -4.1%
Acuity Brands, Inc. Equity -5.6%
Genworth Financial Inc. Equity -9.2%

Source: Miller Value Partners

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.

©2019 Miller Value Partners, LLC

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