Last week, the Opportunity Equity strategy lost -0.94%, underperforming the S&P 500’s 0.58% rise (Exhibit 1). The strategy ended the week up 1.93% YTD, or 112 basis points behind the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 2/23/181
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (2/16 -2/23) | -0.94% | 0.58% |
| MTD | -2.04% | -2.53% |
| QTD | 1.93% | 3.05% |
| YTD | 1.93% | 3.05% |
| Inception (annualized since 6/26/00) | 7.22% | 5.71% |
Source: Bloomberg, Miller Value Partners
Amazon.com Inc. (AMZN) had a strong weak as MKM raised their price target on the company to $1,750 from $1,350. Flexion Therapeutics (FLXN) crossed above the 50 and 100-day moving average after management provided an update on the company’s commercial launch of Zilretta. Management stated that they were comfortable with consensus sales estimates for Zilretta of $28m in 2018 and $129M in 2019. American Airlines Group Inc. (AAL) crossed above the 50-day moving average. There was minimal news on JPMorgan Chase & Co. (JPM/WS) and Platform Specialty Products Corp. (PAH).
Exhibit 2: Significant Contributors to Performance, 2/16/18 - 2/23/18
| Name | Type | Return |
| Amazon.com Inc. | Equity | 3.5% |
| Flexion Therapeutics | Equity | 8.9% |
| JPMorgan Chase & Co. – Warrants | Derivative | 3.2% |
| American Airlines Group Inc. | Equity | 3.5% |
| Platform Specialty Products Corp. | Equity | 2.4% |
Source: Miller Value Partners
Wayfair Inc. (W) fell below the 50 and 100-day moving average after releasing fourth quarter results which beat on the topline but disappointed on first quarter guidance. The company had revenues that came in at $1.42B compared to $1.36B consensus but active customer growth slowed to 33% vs. 39% in the third quarter. Global LTM active customers came in slightly below forecast at 11M and gross margins were lower than expected at 23.1%. Management guided for first quarter revenue of $1.33-1.36B (consensus $1.29B) with adjusted EBITDA margin guidance of -3.9% to -4.2%, implying adj. EBITDA loss of $53-56M (consensus of -$15M). RH (RH) fell below the 100-day moving average. OneMain Holding Inc. (OMF) announced another secondary offering from a selling stockholder, an affiliate of AIG Capital Corp, with the shares representing 3% of shares outstanding as of December. Pandora Media Inc. (P) fell below the 50-day moving average after releasing fourth quarter earnings that were above consensus but disappointed in first quarter guidance. Pandora had revenue of $395M (vs. consensus of $375M) and adjusted EBITDA of $5.8M (vs. consensus of -$8.9M). Pandora guided for first quarter revenue of $295-$305M compared to expectations of $310-315M and adjusted EBITDA loss of $90-100M compared to consensus of -$52M. Lennar Corp. (LEN) was upgraded at Barclays, Evercore ISI, JPMorgan and UBS over the week.
Exhibit 3: Significant Detractors from Performance, 2/16/18 - 2/23/18
| Name | Type | Return |
| Wayfair Inc. | Equity | -22.8% |
| RH | Equity | -5.2% |
| OneMain Holdings Inc. | Equity | -4.7% |
| Pandora Media Inc. | Equity | -15.9% |
| Lennar Corp. | Equity | -3.0% |
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.
©2018 Miller Value Partners, LLC
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