Last week, the Opportunity Equity strategy lost 1.82%, outperforming the S&P 500’s 1.98% loss (Exhibit 1). The strategy ended the week up 0.08% YTD, or 92 basis points behind the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/2/181
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (2/23 -3/2) | -1.82% | -1.98% |
| MTD | 0.35% | -0.81% |
| QTD | 0.08% | 1.00% |
| YTD | 0.08% | 1.00% |
| Inception (annualized since 6/26/00) | 7.10% | 5.58% |
Source: Bloomberg, Miller Value Partners
Intrexon Corp. (XON) crossed above the 100-day moving average after announcing fourth quarter earnings with revenues coming in ahead of expectations due to the recognition of $29M of previously deferred revenue due to termination of graft-vs-host disease ECC with Ziopharm. The company had revenues of $77M vs. $48M expected leading to loss per share of -$0.23 vs. the street at -$0.32. The outlook for 2018 was positive with Intrexon making incremental progress in several projects in the energy sector and moving forward in their healthcare program with Ziopharm on point-of-care CAR-T trial being initiated in late 2Q18 and initiating a pivotal trial in rGBM in the second half of the year in addition to enrolling pediatric GBM patients for a Phase I study. The company is making more progress with its self-limiting insects/gene-drivers. Wayfair Inc. (W) crossed above the 100-day moving average and received a buy rating from Loop Capital Markets which initiated coverage with a price target of $87, upside of 8%. Stitch Fix Inc. (SFIX) crossed above the 50-day moving average. Platform Specialty Products Corp. (PAH) crossed above the 50-day moving average after releasing 4Q earnings results which were in line with expectations. The company had EBITDA of $226M vs. $224M expected and EPS of $0.23 vs. $0.24 expected. The company increased 2018 EBITDA guidance to $870-900M from $860-890M previously and expects organic revenue growth of 3-4% YoY in both Performance Solutions and Arysta. The company reiterated its plan to separate the company into two separate public companies by mid-2018. There was minimal news on Flexion Therapeutics (FLXN).
Exhibit 2: Significant Contributors to Performance, 2/23/18 - 3/2/18
| Name | Type | Return |
| Intrexon Corp | Equity | 21.1% |
| Wayfair Inc. | Equity | 6.8% |
| Stitch Fix Inc. | Equity | 11.7% |
| Platform Specialty Products Corp. | Equity | 3.4% |
| Flexion Therapeutics | Equity | 3.1% |
Source: Miller Value Partners
Valeant Pharmaceuticals International Inc. (VRX) fell below the 100 and 200-day moving average after announcing fourth quarter results which were largely in line. The company posted revenues of $2.163B versus expectations for $2.179B and adjusted EBITDA of $875M vs. $875M expected and adjusted net income of $347M vs. consensus of $347.2M. The company disappointed on 2018 guidance with EBITDA of $3.02-3.2B versus consensus of $3.36B on revenue of $8.1-8.3B versus expectations for $8.3B. Management expects 2018 to be a trough year reflecting conservative loss of exclusivity assumptions with the company returning to growth in 2019 with revenue and adjusted EBITDA compound annual growth rates anticipated to be 4-6% and 5-8% respectively through 2021. The company has paid down $6.7B in debt and continues to improve the balance sheet. Foot Locker Inc. (FL) fell below the 50, 100 and 200-day moving average. The company released 4Q results which were largely in-line but disappointed on guidance. The company had EPS of $1.26 vs. $1.25 expected with comp sales down 3.7% vs. 2.4% expected; however, US traffic was flat vs. down mid-single digits last quarter. The company guided for comparable sales to be flat to up low-single digits with gross margins improving and EPS to be up double digits on lower taxes and fewer shares outstanding but management expects negative comparable sales trends to continue in the first half of the year reaching an inflection point in the 2nd half of the year and becoming positive. JPMorgan Chase & Co. Warrants (JPM/WS) was down over the week after their annual investor day. The company provided 2018 guidance which was in line with expectations of net interest income of $54-55B, average core loan growth of 6-7%, net charge-offs to remain relatively flat across the business, and increased its target for a net payout ratio from 55-75% to 100%. Allergan (AGN) was down over the week after the announcement that Revance (RVNC) and Mylan (MYL) are collaborating on a biosimilar Botox. While the product is years away the risk to Allergan’s Botox franchise had investors worried. There was minimal news on RH (RH).
Exhibit 3: Significant Detractors from Performance, 2/23/18 - 3/2/18
| Name | Type | Return |
| Valeant Pharmaceuticals International Inc. | Equity | -20.3% |
| Foot Locker Inc. | Equity | -17.0% |
| RH | Equity | -9.3% |
| JPMorgan Chase & Co. – Warrants | Derivative | -5.6% |
| Allergan | Equity | -10.8% |
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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