Last week, the Opportunity Equity strategy lost -5.58%, underperforming the S&P 500’s -3.82% loss (Exhibit 1). The strategy ended the week up 1.20% YTD, or 224 basis points behind the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 2/2/181
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (1/26 -2/2) | -5.58% | -3.82% |
| MTD | -2.74% | -2.16% |
| QTD | 1.20% | 3.44% |
| YTD | 1.20% | 3.44% |
| Inception (annualized since 6/26/00) | 7.20% | 5.59% |
Source: Bloomberg, Miller Value Partners
Pandora Media Inc. (P) crossed above the 50-day moving average after announcing its restructuring plan which will reduce the workforce by 5% and is expected to result in annualized savings of $45M to adjusted EBITDA. The savings are expected to be reinvested into key growth areas for the business. Amazon.com Inc. (AMZN) ended the week up after announcing strong fourth quarter results. The company posted Q4 revenue of $60.5B compared to consensus of $59.8B with operating income of $2.1B compared to estimates of $1.48B and 30% above the high end of guidance. AWS growth accelerated to 45% YoY excluding FX to $5.1B in revenue and had operating margins up to 26.5%. The company guided for Q1 net sales of $47.75B to $50.75B and operating income of $300M to $1B. Amazon also announced that they would be partnering with Berkshire Hathaway and JP Morgan to offer lower cost healthcare services to their US employees. They plan to set up an independent company that is free from profit-making incentives and constraints. athenahealth Inc. (ATHN) finished the week up after releasing 4Q results which beat expectations with EPS of $1.11 vs. estimates of $0.63. The beat was driven by operating margin expansion of 890bps YoY as a result of the reduced costs associated with the $100-$115M savings program announced in October. Revenue grew 14% to $329M ahead of estimates of $320M. GTY Technology Holdings Inc. (GTYHU) crossed above the 50-day moving average. Facebook Inc. (FB) announced strong earnings. The company had total revenues of $12.97B vs. consensus of $12.5B with total ad revenue growing 48% YoY and EPS of $2.27 vs. $2.25. Monthly active users (MAU) and daily active users (DAU) increased 14.5% and 14.2% worldwide but showed sequential decline for the first time in the US and Canada.
Exhibit 2: Significant Contributors to Performance, 1/26/18 - 2/2/18
| Name | Type | Return |
| Pandora Media Inc. | Equity | 17.5% |
| Amazon.com Inc. | Equity | 2.0% |
| Athenahealth Inc. | Equity | 8.4% |
| GTY Technology Holdings Inc. | Equity | 0.9% |
| Facebook Inc. | Equity | 0.2% |
Source: Miller Value Partners
RH (RH) crossed below the 50-day moving average. Lennar Corp. (LEN) crossed below the 50-day moving average as December pending home sales index rose 0.5% YoY. Pulte Group Inc. (PHM) ended the week below the 50-day and 100-day moving average after announcing fourth quarter results. The company reported revenues of $2.72B compared to consensus of $2.76B and adjusted EPS in-line at $0.85. The soft topline miss was driven by strong deliveries that partially offset weaker average sales price growth (4.8% vs consensus of 7.1%). New orders of 4,805 came in ahead of consensus of 4,613 but 2018 guidance for delivery growth came in at 5-10% compared to expectations of 14% growth. The company increased their buyback program by an additional $500M. Healthcare names (VRX, MNK) were down over the week after the announcement that Amazon would be partnering with Berkshire Hathaway and JP Morgan to offer lower cost healthcare services to their US employees. They plan to set up an independent company that is free from profit-making incentives and constraints. Mallinckrodt plc (MNK) declined over the week as Moody’s Investors Service lowered its outlook on the company’s international finance subsidiary from under review to negative, affirming its current bond status but voicing growing concerns regarding Acthar’s revenue declines as well as its opioid-related exposure. The company was downgraded to underweight by Barclay’s analyst following the company’s acquisition of SCMP lowering their price target to $20, 16% upside from Friday’s close.
Exhibit 3: Significant Detractors from Performance, 1/26/18 - 2/2/18
| Name | Type | Return |
| RH | Equity | -11.4% |
| Lennar Corp. | Equity | -11.5% |
| Pulte Group Inc. | Equity | -11.1% |
| Valeant Pharmaceuticals International Inc. | Equity | -6.8% |
| Mallinckrodt plc | Equity | -17.3% |
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.
©2017 Miller Value Partners, LLC
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