Last week, Opportunity Equity strategy declined -1.46%, underperforming the S&P 500’s 0.29% gain (Exhibit 1). The strategy ended the week up 19.36% YTD, or 186 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 11/3/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (10/27 - 11/3) | -1.46% | 0.29% |
| MTD | -1.39% | 0.51% |
| QTD | -0.94% | 2.85% |
| YTD | 19.36% | 17.50% |
| Inception (annualized since 12/30/99) | 6.80% | 5.26% |
Source: Bloomberg, Miller Value Partners
Apple Inc. C100 1/18 (AAPL) call options rose over the week after releasing quarterly results that beat estimates despite the iPhone X not being released until November and providing strong first quarter guidance. The company had sales of $52.6B compared to $50.7B estimates and EPS of $2.07 vs. $2.05. The company saw service revenue increase 24% YoY while watches and accessories grew 36% YoY. The company guided for revenue of $84-87B and gross margin of 38.0-38.5% for the first quarter. Flexion Therapeutics (FLXN) crossed above the 200-day moving average. OneMain Holdings Inc. (OMF) reported third quarter results that missed with EPS of $1.01 excluding -$0.10 impact from hurricanes compared to consensus of $1.03. The miss was the result of lower portfolio yields and receivables balances. The company guided for lower 2017 EPS of $3.53 including the hit from the hurricanes compared to previous guidance of $3.75-$4.00. The market reacted positively to the benign credit outlook. The company maintained net charge off guidance at 7% for the year but expects improvement in 2018 to below 7% as the credit outlook continues to improve. Endo Pharmaceuticals Holdings Inc. (ENDP) preannounced third quarter results with preliminary revenue of $785M vs. consensus of $785.4M, EBITDA of $370M versus consensus of $317.9M and EPS of $0.85 vs. consensus of $0.66. the company reaffirmed 2017 revenue guidance of $3.38-3.536B and expects to be at the upper-end of guidance for EBITDA ($1.48-1.56B) and EPS ($3.35-3.65). There was minimal news on Amazon.com Inc. (AMZN).
Exhibit 2: Significant Contributors to Performance, 10/27/17 – 11/3/17
| Name | Type | Return |
| Apple Inc C100 1/18 | Derivative | 14.8% |
| Flexion Therapeutics | Equity | 7.5% |
| OneMain Holdings Inc | Equity | 3.4% |
| Endo Pharmaceuticals Holdings Inc | Equity | 7.5% |
| Amazon.com Inc | Equity | 1.0% |
Source: Miller Value Partners
Quotient Technology Inc. (QUOT) fell below the 100-day moving average after releasing third quarter results which were largely inline. The company reported revenue of $82M and EBITDA of $12.5M compared to consensus of $83M and $11.8M, respectively. Media revenue was up 62% YoY and RetailerIQ was up 50% YoY. The company raised full year revenue guidance to $90-94M from $89-92M but moved EBITDA guidance to $12M-15M from $14.4-15.4M. Pandora Media Inc. (P) fell over the week after reporting third quarter results which missed on the topline but beat on EBITDA while guiding lower for the full year. The company reported revenue of $378.6M compared to consensus of $380M and EBITDA of -$5.3M vs. -$10.3M. The company lowered 2017 revenue to $1.44B compared to prior guidance of $1.45-1.50B. Management laid out its vision for Pandora’s turnaround, prioritizing listener growth and upgrading ad-technology. Lennar Corp. (LEN) announced that it had entered into a definitive agreement to acquire CalAtlantic Group (CAA) for $51.34/share, 27% premium to CAA’s closing price. This deal will position LEN as a top three homebuilder in 24 of the 30 largest metropolitan statistical areas in the US. Alexion Pharmaceuticals (ALXN) moved lower as news broke that Amgen’s biosimilar to Soliris had moved into a Phase 3 study in the EU. While Soliris’ US IP appears safe until 2027, roughly 2/3rds of Soliris’ revenue is outside the US where it patent expires in 2020. There was minimal news on MGIC Investment Corp. (MTG).
Exhibit 3: Significant Detractors from Performance, 10/27/17 - 11/3/17
| Name | Type | Return |
| Quotient Technology Inc | Equity | -11.4% |
| Pandora Media Inc | Equity | -22.4% |
| MGIC Investment Corp | Equity | -5.9% |
| Lennar Corp | Equity | -5.8% |
| Alexion Pharmaceuticals | Equity | -8.3% |
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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