Last week, the Opportunity Equity strategy lost 1.10%, underperforming the S&P 500’s 0.40% loss (Exhibit 1). The strategy ended the week up 8.91% YTD, or 249 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Versus Equity Indices, Through 3/10/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (3/3 - 3/10) | -1.10% | -0.40% |
| MTD | -0.69% | 0.45% |
| QTD | 8.91% | 6.42% |
| YTD | 8.91% | 6.42% |
| Inception (annualized since 12/30/99) | 6.50% | 4.86% |
Source: Bloomberg, Miller Value Partners
RH (RH) was a top contributor for the week after rumors circulated that Williams-Sonoma was interested in a merger. Lennar Corp. (LEN) and Pulte Group Inc. (PHM) were both up over the week following positive comments out of Barclays on the spring buying season and the strong February jobs report. Over the week, Intrexon (XON) announced the formation of a wholly owned subsidiary called “Precigen” as a structural alternative to their healthcare verticals. XON also announced the departure of President Geno Germano from the company. There was minimal news on Ziopharm Oncology (ZIOP).
Exhibit 2: Significant Contributors to Performance, 3/3/17 - 3/10/17
| Name | Type | Return |
| RH | Equity | 13.2% |
| Lennar Corp. | Equity | 5.7% |
| Pulte Group Inc. | Equity | 5.1% |
| Intrexon Corp. | Equity | 3.8% |
| Ziopharm Oncology | Equity | 6.3% |
Source: Miller Value Partners
American Airlines Group (AAL) fell below the 100-day moving average after releasing February traffic and lowering Q1’17 unit revenue (RASM) guidance to 1.5%-3.5% from 2.5%-4.5%. American cited higher than expected completion factor for the decrease. Endo Pharmaceuticals Holding (ENDP) was down over the week after Cowen’s analyst, Ken Cacciatore, said ENDP “seemingly remains a value trap”. This was followed by Trump tweeting about high drug prices which put further pressure on the industry. Delta Air Lines Inc. (DAL) fell below the 100-day moving average after cutting its Q1 unit revenue and margin guidance. Delta guided for flattish PRASM and a 10-11% operating margin from the previously guided 11%-13%. Valeant Pharmaceuticals (VRX) completed the $1.1B pay down of senior secured term loan and raised $3.25B in its new debt offering which it used to commence a tender offer for up to $1.1B of the 6.75% Senior notes due 2018. This was part of a refinancing package lenders agreed to. United Continental Holdings (UAL) fell below the 50-day moving average in sympathy with the other airline stocks and after announcing that February consolidated traffic decreased 0.8% and consolidated capacity decreased 0.4% YoY.
Exhibit 3: Significant Detractors from Performance, 3/3/17 - 3/10/17
| Name | Type | Return |
| American Airlines Group Inc. | Equity | -6.2% |
| Endo Pharmaceuticals Holdings Inc. | Equity | -11.6% |
| Delta Air Lines | Equity | -4.4% |
| Valeant Pharmaceuticals Int. Inc. | Equity | -5.8% |
| United Continental Holdings | Equity | -4.3% |
Source: Miller Value Partners
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 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.
©2017 Miller Value Partners
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