Last week, the Opportunity Equity strategy gained 0.76%, underperforming the S&P 500’s 0.95% rise (Exhibit 1). The strategy ended the week up 28.18% YTD, or 632 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 12/15/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (12/8 - 12/15) | 0.76% | 0.95% |
| MTD | 2.16% | 1.14% |
| QTD | 6.38% | 6.67% |
| YTD | 28.18% | 21.86% |
| Inception (annualized since 12/30/99) | 7.18% | 5.44% |
Source: Bloomberg, Miller Value Partners
Delta Air Lines Inc. (DAL) held its investor day last week where it increased 4Q PRASM guidance to +4% but lowered 4Q margin guidance to the low end of the range (~11%) due to higher fuel and non-fuel costs. Delta provided 2018 EPS guidance of $5.35-$5.70 with an additional $1-$1.25 if tax reform passes. In addition, if tax reforms passes, it could extend the company’s NOLs through 2019 with cash taxes paid in 2020. Delta guided for 2018 CASM of 0%-2% and revenue growth of 4-6%. The company stated that 70% of FCF will be returned to shareholders through dividends and buybacks. Piper Jaffrey and Stifel came out with positive notes on Wayfair Inc. (W) citing the 53% sales growth over the 5-day Thanksgiving weekend for Wayfair. With online retailers gaining share and November US retail sales growth coming in well above expectations, the analysts are positive on the holiday season. Apple Inc. (AAPL) call options increased over the week after Apple announced its acquisition of Shazam for about $400M and a $390M investment in fiber optic company Finisar. There was minimal news on Endo Pharmaceuticals Holdings Inc. (ENDP) and Quotient Technology Inc. (QUOT).
Exhibit 2: Significant Contributors to Performance, 12/8/17 – 12/15/17
| Name | Type | Return |
| Delta Air Lines Inc | Equity | 15.8% |
| Wayfair Inc | Equity | 4.9% |
| Endo Pharmaceutical Holdings Inc | Equity | 7.2% |
| Quotient Technology Inc | Equity | 6.7% |
| Apple Inc C100 | Derivative | 5.2% |
Source: Miller Value Partners
RH (RH) declined over the week despite the announcement that Gary Friedman, CEO, bought an additional $1M of shares. MGIC Investment Corp. (MTG) reported operating statistics for November 2017 which showed insurance in force at $193.5B, up 6.7% YoY while new defaults were up 59% YoY; however, if you exclude hurricane-affected markets, new defaults were actually down 22% YoY. OneMain Holdings Inc. (OMF) fell below the 200-day moving average after announcing a secondary offering of its common stock after the market close on December 13th selling 7.5M of Fortress-owned shares. There was minimal news on Intrexon Corp. (XON) and Pulte Group Inc. (PHM).
Exhibit 3: Significant Detractors from Performance, 12/8/17 - 12/15/17
| Name | Type | Return |
| RH | Equity | -4.9% |
| MGIC Investment Corp | Equity | -3.5% |
| Intrexon Corp | Equity | -4.8% |
| OneMain Holdings Inc | Equity | -2.8% |
| Pulte Group Inc | Equity | -1.7% |
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, LLC
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