Last week, the Opportunity Equity lost -2.64%, underperforming the S&P 500’s -0.03% decline (Exhibit 1). The strategy ended the week up 3.14% YTD, or 970 basis points behind the S&P 500.
Exhibit 1: Preliminary Performance of LMM Opportunity Equity Strategy Versus Equity Indices, Through 12/16/161
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (12/9 - 12/16) | -2.64% | -0.03% |
| MTD | 3.71% | 2.78% |
| QTD | 4.25% | 4.64% |
| YTD | 3.14% | 12.84% |
| Inception (annualized since 12/30/99) | 6.20% | 4.59% |
Source: Bloomberg, LMM
Apple Inc. (AAPL) Call Options were a top contributor as the Apple AirPods began shipping last week. Endurance International Group Holdings (EIGI) continued to move higher as it broke out above the 200 day moving average. Endo Pharmaceuticals Holdings Inc. (EIGI) ended the week up after the DOJ charged two former senior generic pharmaceutical executives (previously at Heritage Pharmaceuticals Inc.) for their roles in a price fixing conspiracy. The federal investigation is still ongoing. Mortgage Insurers comprised two of last week’s top five contributors – Radian Group Inc. (RDN) and MGIC Investment Corp (MTG) - as they are expected to benefit from the rise in interest rates. MGIC Investment Corp benefitted from an upgrade from Deutsche Bank that cited MGIC’s ability to manage its convertible notes, strong outlook for operating results and continued multiple expansion. Deutsche Bank increased its target price for Radian to $20.
Exhibit 2: Significant Contributors to Performance, 12/9/16 - 12/16/16
| Name | Type | Return |
| Apple Call Options | Derivative | 7.1% |
| Endurance International Group Holdings | Equity | 6.9% |
| Endo Pharmaceuticals Holdings Inc. | Equity | 2.5% |
| Radian Group | Equity | 4.2% |
| MGIC Investment Corp | Equity | 1.0% |
Source: LMM LLC.
Valeant Pharmaceuticals International (VRX) declined last week after Pershing Square Capital (Director) announced that it sold $51.6M in stock reducing its position by 16% in order to “generate a tax loss in 2016 for their investors”. The company also announced the departures of former CFO Rob Rosiello, EVP and Company Group Chairman, Dr. Ari Kellen and EVP and Group Chariman Anne Whitaker. If the low on the 15th holds, VRX will have made a double bottom in the $13’s. It’s already up 12% off the low last week. Genworth Financial Inc. (GNW) seemed to be under pressure due to regulatory concerns over its proposed acquisition. GNW missed its initial filing deadline for the proxy but it is expected to file any time and still anticipates the deal to close in the middle of 2017. GNW also announced the addition of Debra J. Perry and Robert P. Restrepo Jr. as independent directors on the Board of Directors. Platform Specialty Products Corp. (PAH) announced that it had settled its obligations under the Series B convertible preferred stock by exercising the alternative settlement mechanism. PAH paid $460mm in cash and issued 5.5mm shares to Permira. RJ Kirk, CEO of Intrexon Corp. (XON), purchased $1M in stock last week. American Airlines Group (AAL) was fined $1.6M by US government for violating tarmac rule.
Exhibit 3: Significant Detractors from Performance, 12/9/16 - 12/16/16
| Name | Type | Return |
| Valeant Pharmaceuticals International | Equity | -8.6% |
| Genworth Financial Inc. | Equity | -8.1% |
| Platform Specialty Products Corp. | Equity | -6.4% |
| Intrexon Corp. | Equity | -4.7% |
| American Airlines Group Inc. | Equity | -4.1% |
Source: LMM LLC.
1The 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 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 LMM.
Any views expressed are subject to change at any time, and LMM 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.
©2016 LMM LLC. LMM LLC is owned by Bill Miller and Legg Mason, Inc.
Share