Last week, Opportunity Equity strategy declined -0.89%, underperforming the S&P 500’s 0.88% gain (Exhibit 1). The strategy ended the week up 22.81% YTD, or 593 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 10/20/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (10/13 - 10/20) | -0.89% | 0.88% |
| MTD | 1.92% | 2.31% |
| QTD | 1.92% | 2.31% |
| YTD | 22.81% | 16.88% |
| Inception (annualized since 12/30/99) | 6.99% | 5.24% |
Source: Bloomberg, Miller Value Partners
MGIC Investment Corp. (MTG) rose over the week after releasing third quarter results with EPS of $0.32, above consensus expectations of $0.26 due to improved credit trends and lower loss ratios. The company had incurred losses of $30M vs $76M estimated due to a $38M positive reserve development. JPMorgan Chase & Co (JPM/WS) warrants rose during the week. The company released September charge-offs that declined 9bps in September to 2.32% while 30-day+ delinquencies increased from 1.16% to 1.22% and 90-day+ delinquencies rose 2bps to 0.58%. Bank of America Corp. (BAC) released September card charge-offs which declined to 2.37% from 2.67% in August while 30-day+ delinquencies rose 1bps to 1.56%. The previous week, Bank of America had released third quarter results with EPS of $0.48 vs. consensus of $0.45. Endurance International Group Holdings (EIGI) rose above the 200 and 100-day moving average. There was minimal news on RH (RH).
Exhibit 2: Significant Contributors to Performance, 10/13/17 – 10/20/17
| Name | Type | Return |
| MGIC Investment Corp | Equity | 6.7% |
| RH | Equity | 4.6% |
| JPMorgan Chase & Co - Warrants | Derivative | 6.6% |
| Bank of America Corp | Equity | 5.2% |
| Endurance International Group Holdings | Equity | 5.1% |
Source: Miller Value Partners
United Continental Holdings (UAL) fell below the 50-day moving average after releasing third quarter results which came inline but disappointing guidance. The company had third quarter EPS of $2.22 beating consensus of $2.19 but guided for fourth quarter unit cost of 2.5%-3.5% compared to full year guidance which implied unit costs being 1-2% along with pre-tax margin expected to decline 440-640bps YoY. The market reacted poorly to the quarterly call as management couldn’t answers a number of questions on costs and capacity. RBC’s analyst lowered their price target for Valeant Pharmaceuticals International Inc. (VRX) to $18 from $21(upside of 48%) keeping the company at sector perform. Flexion Therapeutics (FLXN) fell below the 50-day moving average. There was minimal news on Quotient Technology Inc. (QUOT) and Endo Pharmaceuticals Holdings Inc. (ENDP).
Exhibit 3: Significant Detractors from Performance, 10/13/17 - 10/20/17
| Name | Type | Return |
| United Continental Holdings | Equity | -11.4% |
| Valeant Pharmaceuticals International Inc | Equity | -9.4% |
| Quotient Technology Inc | Equity | -6.0% |
| Flexion Therapeutics | Equity | -9.3% |
| Endo Pharmaceuticals Holdings Inc | Equity | -5.5% |
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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