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Sep 06, 2022

Opportunity Equity Update for Week Ended 9/2/22

Christina Siegel Malbon

Bausch Health Rises on Exchange Offer while Cleveland-Cliffs Follows Commodity Prices Lower

Last week, the Opportunity Equity strategy fell -4.10%, underperforming the S&P 500’s -3.23% loss. (Exhibit 1). The strategy ended the week down -27.58% YTD, 1,080 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 9/2/221

Time Period Opportunity Equity S&P 500
Last Week (8/26 - 9/2) -4.10% -3.23%
MTD -0.78% -0.75%
QTD 10.35% 3.98%
YTD -27.58% -16.78%
Inception (annualized since 6/26/00) 6.43% 6.60%

Source: Bloomberg, Miller Value Partners

DXC Technology Company (DXC) rose after the M&A focused publication, The Betaville blog, reported rumors that the company was an acquisition target. This was followed by DXC canceling its scheduled appearance at the Deutsche Bank 2022 Technology Conference on Thursday.

Bausch Health Companies Inc. (BHC) rose after the company launched an offer to exchange its existing unsecured notes for up to $4B of new secured notes. The exchange offer will help accelerate the path to reducing net leverage to Bausch’s 6.5-6.7x net debt to EBITDA target needed prior to spinning out its stake in Bausch + Lomb (BLCO). RBC raised its price target to $8 from $4.50 (24% upside).

Uber Technologies Inc (UBER) announced a new partnership with ADT Inc. to provide an in-app safety feature for riders and drivers nationwide. Alaunos Therapeutics Inc. (TCRT UW) filed a $200M mixed shelf offering during the week. Pangaea One, L.P. rose on limited news.

Exhibit 2: Significant Contributors to Performance, 8/26/22 - 9/2/22

Name Type Return
DXC Technology Company Equity 12.9%
Bausch Health Companies Inc Equity 24.8%
Uber Technologies Inc Equity 1.6%
TCRT Restricted Warrant 2019 Derivative 12.1%
Pangaea One, L.P. Equity 0.3%

Source: Miller Value Partners

Farfetch Ltd. (FTCH) declined over the week giving back part of its gains from the week before following the Richemont deal announcement and 2Q results. Cowen raised its price target on Farfetch Ltd. to $11 from $9 (17% upside).

Teva Pharmaceutical Industries Ltd (TEVA) fell through the 50-day moving average. The company won European approval for biosimilar to Roche’s eye therapy Lucentis for the treatment of macular degeneration. Exelixis (EXEL) filed another court case against TEVA on allegations of patent infringement related to a generic version of the company’s kidney cancer therapy, Cabometyx.

Cleveland-Cliffs Inc. (CLF) fell through the 50-day moving average following steel prices lower over the course of the week. The company reached a tentative labor agreement with the United Steelworkers labor union effective September 1st. Alibaba Group Holding Ltd. (BABA) fell after the US Public Company Accounting Oversight Board (PCAOB) selected the company for an audit inspection in the wake of reaching an audit agreement with Chinese regulators. Taylor Morrison Home Corp (TMHC) fell below the 50-day moving average as interest rates continued to move higher.

Exhibit 3: Significant Detractors from Performance, 8/26/22 - 9/2/22

Name Type Return
Farfetch Ltd Equity -22.1%
Teva Pharmaceutical Industries Ltd Equity -7.8%
Cleveland-Cliffs Inc Equity -10.3%
Taylor Morrison Home Corp Equity -6.7%
Alibaba Group Holding Ltd. Equity -6.3%

Source: Miller Value Partners

Check out the Income Strategy weekly Update. Click to Read.

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