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May 31, 2022

Opportunity Equity Update for Week Ended 5/27/22

Christina Siegel Malbon

Ovintiv, Diamondback Rise in Sympathy with Crude Prices While Bausch Health, Tupperware Drop on Price Target Cuts

Last week, the Opportunity Equity strategy gained 8.31%, outperforming the S&P 500’s 6.62% gain. (Exhibit 1). The strategy ended the week down -20.19% YTD, 798 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 5/27/221

Time Period Opportunity Equity S&P 500
Last Week (5/20 - 5/27) 8.31% 6.62%
MTD -3.82% 0.81%
QTD -14.20% -7.98%
YTD -20.19% -12.21%
Inception (annualized since 6/26/00) 6.98% 6.94%

Source: Bloomberg, Miller Value Partners

Ovintiv Inc (OVV) rose through the 50-day moving average while Diamondback Energy Inc (FANG) rose through the 50 and 100-day moving averages in sympathy with higher crude oil prices. DXC Technology Company (DXC) rose after reporting strong fiscal Q4 2022 earnings. Revenue of $4.0B came in slightly behind consensus expectations of $4.1B while EBITDA of $765M topped estimates of $688M. FCF of $234M came in well ahead of expectations of $43M and the company maintained its long-term FCF targets, including $1.5B for FY24 (17% FCF yield). In the quarter, DXC repurchased 18.8M shares (7% of shares outstanding) and expects to repurchase another $770M worth of shares over the next three quarters (~9% of shares outstanding at current prices). Farfetch Ltd (FTCH) rose despite Q1 2022 results coming in below consensus expectations. Gross Merchandise Value (GMV) of $931M, revenue of $515M, and EBITDA of -$36M all came in below consensus of $1.1B, $560M, and -$20M, respectively. The company lowered its GMV guidance for the year to $750M due to macro concerns in Russia and China but posted a record-high third-party take rate at 32%. Cleveland Cliffs (CLF) rose through the 100 and 200-day moving averages as Hot-Rolled Coil Steel (HRC) prices remain elevated at $1,300 per ton.

Exhibit 2: Significant Contributors to Performance, 5/20/22 - 5/27/22

Name Type Return
Ovintiv Inc Equity 19.6%
DXC Technology Company Equity 18.5%
Diamondback Energy Inc Equity 17.2%
Farfetch Ltd Equity 23.8%
Cleveland-Cliffs Inc Equity 12.6%

Source: Miller Value Partners

TLT Puts (TLT P143 1/19/24) followed rates lower over the week. Piper Sandler cut its price target on Bausch Health Companies Inc (BHC) from $27 (173% upside) to $7 (29% downside). Lane Research lowered its price target on Tupperware Brands Corp (TUP) from $25 (263% upside) to $12.50 (82% upside). There was limited news on Green Thumb Industries Inc. (GTBIF) and Vontier Corp (VNT).

Exhibit 3: Significant Detractors from Performance, 5/20/22 - 5/27/22

Name Type Return
Green Thumb Industries Inc. Equity -13.0%
Vontier Corp Equity -1.9%
TLT P143 1/24 Derivative -1.7%
Bausch Health Companies Inc Equity -0.6%
Tupperware Brands Corp Equity -1.7%

Source: Miller Value Partners

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1 The 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 information about Opportunity Equity Strategy performance, please click on the Opportunity Equity Strategy 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 based on the representative account 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. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners. Portfolio composition is shown as of a point in time and is subject to change without notice.

©2022 Miller Value Partners, LLC