Last week, Opportunity Equity strategy strategy declined -1.37%, underperforming the S&P 500’s 0.23% gain (Exhibit 1). The strategy ended the week up 21.14% YTD, or 398 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 10/27/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (10/20 - 10/27) | -1.37% | 0.23% |
| MTD | 0.53% | 2.55% |
| QTD | 0.53% | 2.55% |
| YTD | 21.14% | 17.16% |
| Inception (annualized since 12/30/99) | 6.90% | 5.25% |
Source: Bloomberg, Miller Value Partners
Amazon.com Inc. (AMZN) rose over the week after releasing third quarter results beating across the board. Revenue of $43.7B beat consensus of $41.6B and came in above the high-end of guidance of $39.25-$41.75B while EPS came in at $0.52 vs $0.50. AWS grew 12% q/q and was up 42% y/y with operating margins rebounding to 25.5% from 22.3% in 2Q. The company guided for 4Q17 revenue of $56-60.5B and operating income of $300M-$1.65B. Pulte Group Inc. (PHM) increased over the week despite a mixed quarter. The company reported revenue of $2.06B vs consensus of $2.23B but beat on EPS of $0.60 vs $0.59 due to SG&A leverage. The company bought back $260M of shares during the third quarter. The Apple Inc. C100 1/18 call options (AAPL) climbed as the iPhone X preorders were opened and extended shipment dates implied strong demand. There was minimal news on RH (RH) and MGIC Investment Corp (MTG).
Exhibit 2: Significant Contributors to Performance, 10/20/17 – 10/27/17
| Name | Type | Return |
| Amazon.com Inc | Equity | 12.0% |
| Pulte Group Inc | Equity | 7.4% |
| RH | Equity | 3.4% |
| Apple Inc C100 1/18 | Derivative | 11.2% |
| MGIC Investment Corp | Equity | 3.8% |
Source: Miller Value Partners
Endo Pharmaceuticals Holdings Inc. (ENDP) fell over the week as people focused on the number of cases surrounding Vasostrict as well as Endo’s lawsuit against the FDA. American Airlines Group Inc. (AAL) fell below the 50 and 100-day moving average after releasing 3Q results that were inline with guidance but disappointed on 2018 guidance of 2.5% capacity growth along with a +2% increase in cost guidance. The company had EPS in the third quarter of $1.42 compared to consensus of $1.40. The company spent $362M on share repurchases and $49M on dividends. Genworth Financial Inc. (GNW) fell below the 50, 100 and 200-day moving average. Alexion Pharmaceuticals (ALXN) fell below the 100-day moving average. The company reported third quarter results which beat consensus on the bottom-line with EPS of $1.44 vs consensus of $1.32 but revenue came in below expectations at $859M vs consensus of $864M. Management raised the low end of FY17 revenue guidance to $3.475B-$3.525B and EPS guidance increased to $5.50-$5.65. Delta Air Lines Inc. (DAL) fell below the 100-day moving average.
Exhibit 3: Significant Detractors from Performance, 10/20/17 - 10/27/17
| Name | Type | Return |
| Endo Pharmaceuticals Holdings Inc | Equity | -23.7% |
| American Airlines Group Inc | Equity | -8.4% |
| Genworth Financial Inc | Equity | -10.8% |
| Alexion Pharmaceuticals | Equity | -7.5% |
| Delta Air Lines Inc | Equity | -5.1% |
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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