Last week, the Opportunity Equity strategy declined -2.15%, underperforming the S&P 500’s -0.14% fall (Exhibit 1). The strategy ended the week up 16.80% YTD, or 53 basis points behind of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 11/10/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (11/3 - 11/10) | -2.15% | -0.14% |
| MTD | -3.51% | 0.37% |
| QTD | -3.06% | 2.71% |
| YTD | 16.80% | 17.33% |
| Inception (annualized since 12/30/99) | 6.67% | 5.24% |
Source: Bloomberg, Miller Value Partners
Valeant Pharmaceuticals International Inc. (VRX) crossed above the 50, 100 and 200-day moving average after releasing third quarter results which beat expectations. The company had revenue of $2.22B vs consensus of $2.17B and adjusted EBITDA of $951M vs. consensus of $872M due to strong Xifaxan sales and lower than expected operating expenses. The company reiterated 2017 adjusted EBITDA guidance of $3.6-3.75B on slightly lower full-year revenue guidance of $8.65B-$8.80B due to divestitures. The company has completed $6B in debt payments since 1Q16 and refinanced its debt obligations with no debt maturing until 2020. Endo Pharmaceuticals Holdings Inc. (ENDP) gained over the week after it released third quarter earnings that were modestly ahead of the pre-announced guidance. The company had revenue of $787M and adjusted EBITDA of $387.9M and reaffirmed full year guidance with revenues of $3.38-3.53B and EPS of $3.35-3.65. JPMorgan raised their price target for Pulte Group Inc. (PHM) to $34.50 from $33.50 citing continued buybacks. There was minimal news on Lennar Corp. (LEN) and Genworth Financial Inc. (GNW).
Exhibit 2: Significant Contributors to Performance, 11/3/17 – 11/10/17
| Name | Type | Return |
| Valeant Pharmaceuticals Intl Inc | Equity | 33.9% |
| Lennar Corp | Equity | 7.5% |
| Endo Pharmaceuticals Holdings Inc | Equity | 9.7% |
| Pulte Group Inc | Equity | 2.8% |
| Genworth Financial | Equity | 4.1% |
OneMain Holding Inc. (OMF) fell below the 50, 100 and 200-day moving average after the company announced in their 10-Q that they are not going to sell their business. The speculation around a sale were caused by Fortress (which owns 55%) winding down such positions. The company filed a secondary common share offering to sell some of Fortress’s stake in the company (10M shares). Intrexon Corp. (XON) fell after announcing third quarter results which came in below consensus. Revenue of $46M was below consensus of $55M as product and collaboration revenue lagged. The company had a loss per share of -$0.33 compared to consensus of -$0.23 due to higher operating expenses. We believe fundamentals were solid overall with progress across various initiatives. Mallinckrodt plc (MNK) fell after releasing third quarter results which missed on the topline but beat on the bottom line due to lower SG&A expenses. The company had revenue of $794M (vs. $808) and EPS of $1.97 (vs. $1.81). Acthar revenue came in weaker than expected ($309 vs $327), with fewer prescriptions being filled, which worried investors. There was minimal news on Pandora Media (P) and Wayfair Inc. (W).
Exhibit 3: Significant Detractors from Performance, 11/3/17 - 11/10/17
| Name | Type | Return |
| OneMain Holdings Inc | Equity | -22.3% |
| Intrexon Corp | Equity | -27.5% |
| Mallinckrodt plc | Equity | -27.5% |
| Pandora Media Inc | Equity | -18.3% |
| Wayfair, Inc | Equity | -8.8% |
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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