Last week, the Opportunity Equity strategy lost -1.70%, underperforming the S&P 500’s 0.88% rise (Exhibit 1). The strategy ended the week up 7.22% YTD, or 202 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 1/19/181
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (1/12 - 1/19) | -1.70% | 0.88% |
| MTD | 7.22% | 5.20% |
| QTD | 7.22% | 5.20% |
| YTD | 7.22% | 5.20% |
| Inception (annualized since 6/26/00) | 7.57% | 5.87% |
Source: Bloomberg, Miller Value Partners
Foot Locker Inc. (FL) rose above the 200-day moving average and was upgraded at Telsey to outperform with a price target of $56, upside of 12%. Lennar Corp. (LEN) was up over the week after a handful of analysts increased their price target for the company after analyzing the fourth quarter earnings announcement the week before. The company released 4Q results with home sales up almost 14% yoy but slightly missed on EPS of $1.29 vs. consensus of $1.47 due to a deferral to the next quarter of a strategic transaction in order to benefit from the new tax bill, otherwise it would have beat. The company increased synergy expectations to $365M in FY19 from $250M previously and guidance included the lower 25% tax rate. RBC raised its price target for Discovery Communications (DISCA) to $29, up from $24 citing potential for increased synergies. MGIC Investment Corp. (MTG) rose over the week after releasing fourth quarter results which beat expectations. The company announced adjusted net operating EPS of $0.43 vs consensus of $0.28. The beat was driven by favorable loss reserve development of $103M. New insurance written was flat year over year at $12.8B and insurance in force increased 7% to $194.9B. There was minimal news on RH (RH).
Exhibit 2: Significant Contributors to Performance, 1/12/18 - 1/19/18
| Name | Type | Return |
| RH | Equity | 4.6% |
| Foot Locker Inc. | Equity | 6.5% |
| Lennar Corp. | Equity | 3.7% |
| Discovery Communications | Equity | 5.7% |
| MGIC Investment Corp | Equity | 3.7% |
Source: Miller Value Partners
Pharmaceuticals (FLXN, VRX, ENDP) broadly traded down after the New York Times published an article suggesting that a group of large non-profit hospitals “plan to go into the drug business themselves”. Flexion Therapeutics (FLXN) fell below the 50 and 100-day moving average. Endo Pharmaceuticals Holdings Inc. (ENDP) fell below the 50 and 100-day moving average. Intrexon Corp. (XON) fell over the week after announcing it will issue 6M shares at a public offering price of $12.50/per share along with granting the underwriters a 30-day option to purchase up to an additional 900K. There was minimal news on Stitch Fix Inc. (SFIX).
Exhibit 3: Significant Detractors from Performance, 1/12/18 - 1/19/18
| Name | Type | Return |
| Valeant Pharmaceuticals International Inc. | Equity | -9.7% |
| Flexion Therapeutics | Equity | -11.5% |
| Intrexon Corp. | Equity | -11.6% |
| Stitch Fix Inc. | Equity | -17.7% |
| Endo Pharmaceuticals Holdings Inc. | Equity | -10.6% |
Source: Miller Value Partners
1The performance figures reflect the results of a representative account net of management fee 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
Share