Last week, Opportunity Equity strategy declined -0.40%, underperforming the S&P 500’s 0.17% gain (Exhibit 1). The strategy ended the week up 23.92% YTD, or 806 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 10/13/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (10/6 - 10/13) | -0.40% | 0.17% |
| MTD | 2.84% | 1.42% |
| QTD | 2.84% | 1.42% |
| YTD | 23.92% | 15.86% |
| Inception (annualized since 12/30/99) | 7.05% | 5.19% |
Source: Bloomberg, Miller Value Partners
OneMain Holdings Inc. (OMF) rose over the week after press reports indicated that OneMain is considering a sale. RH (RH) climbed during the week after announcing the repayment of its $100M second lien term loan, which was used for share repurchases earlier in the year. Genworth Financial Inc. (GNW) announced that South Carolina had approved the proposed acquisition of China’s Oceanwide. Delta Air Lines Inc. (DAL) announced third quarter results with adjusted EPS coming in at $1.57 ahead of consensus at $1.53. The company guided for fourth quarter PRASM of 2-4% far ahead of expectations but EBIT margin guidance of 11-13% came in below consensus of 13.8%. The margin came in lower as a result of the revised employee profit sharing incentives. MGIC Investment Corp. (MTG) released September operational data with insurance in force increasing 6% YoY to $191B and ending primary delinquent loans inventory decreasing 19.8% YoY to 41,235.
Exhibit 2: Significant Contributors to Performance, 10/6/17 – 10/13/17
| Name | Type | Return |
| OneMain Holdings Inc | Equity | 6.3% |
| RH | Equity | 4.7% |
| Genworth Financial Inc | Equity | 8.5% |
| Delta Air Lines Inc | Equity | 3.7% |
| MGIC Investment Corp | Equity | 3.5% |
Source: Miller Value Partners
Valeant Pharmaceuticals International Inc. (VRX) formed a death cross last week after the 50-day moving average fell below the 200-day moving average. Wells Fargo analyst David Maris published a research report questioning the company’s financial controls and use of adjusted vs. non-adjusted earnings amid a lawsuit with Depomed which alleges $20M in unpaid royalties despite acknowledging the claim is financially immaterial. Flexion Therapeutics Inc. (FLXN) fell over the week after the company launched a 4M share offering. Intrexon Corp. (XON) fell below the 50-day moving average and Ziopharm Oncology Inc. (ZIOP) fell below the 50, 100, and 200-day moving average. Citigroup Inc. (C) release 3Q results with EPS of $1.42 compared to $1.32 forecasted and Net Interest Income of $11.56B vs. consensus of $11.65B. The company incurred a $500M reserve build and guided for higher credit losses from 2017 to 2018.
Exhibit 3: Significant Detractors from Performance, 10/6/17 - 10/13/17
| Name | Type | Return |
| Valeant Pharmaceuticals International Inc | Equity | -7.4% |
| Flexion Therapeutics Inc | Equity | -14.1% |
| Intrexon Corp | Equity | -6.2% |
| Ziopharm Oncology Inc | Equity | -11.5% |
| Citigroup Inc | Equity | -4.7% |
1The 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 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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