Last week, Opportunity Equity strategy declined -1.41%, underperforming the S&P 500’s flat performance (Exhibit 1). The strategy ended the week up 22.35% YTD, or 1,068 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 7/28/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (7/21 - 7/28) | -1.41% | 0.00% |
| MTD | 1.43% | 2.13% |
| QTD | 1.43% | 2.13% |
| YTD | 22.35% | 11.67% |
| Inception (annualized since 12/30/99) | 7.06% | 5.04% |
Source: Bloomberg, Miller Value Partners
Alexion Pharmaceuticals (ALXN) reported strong Q2 results, with EPS of $1.56 and revenue of $912M handily surpassing analyst estimates of $1.26 and $847.8M, respectively. The beat was mainly driven by 18% Y/Y volume growth in its Soliris product. Management increased top and bottom-line FY 2017 guidance and the stock was upgraded at Oppenheimer to outperform with a new price target of $175, 27.4% upside. Piper Jaffray came out with a note maintaining their overweight rating on Wayfair, Inc. (W) with price target of $87, or 13.8% upside. The analyst cited that further EV/Sales multiple expansion is likely, particularly as the company appears to be on the path to achieve positive EBITDA by Q4 of this year. Platform Specialty Products (PAH) moved above its 100-day moving average on news that Blackstone, along with CVC Capital Partners, is nearing a $4.25Bn bid for the firm’s agricultural chemical division. Indian based agrochemical producer, UPL Ltd., is also considering making a rival offer north of $4Bn. PAH management plans to use the proceeds to buy back $1Bn in stock and pay down debt. There was no news on Endurance International Group (EIGI).
Exhibit 2: Significant Contributors to Performance, 7/21/17 – 7/28/17
| Name | Type | Return |
| *Recently Added Security* | Equity | 44.7% |
| Alexion Pharmaceuticals | Equity | 4.7% |
| Wayfair, Inc. | Equity | 2.8% |
| Endurance International Group Holdings | Equity | 3.5% |
| Platform Specialty Products Corp. | Equity | 2.3% |
Source: Miller Value Partners
RH (RH) was downgraded from buy to neutral at Citi with a new price target of $76, 16.7% above where it currently trades. The analyst cited incremental risk from the company’s debt-financed share repurchase program as the catalyst. Endo Pharmaceuticals (ENDP) fell after Oppenheimer published a note saying the stock could remain range bound in the $12-$14 range and that it sees the company’s turnaround effort taking several years. The analyst cited additional unfunded mesh liability and continued pricing pressure from the company’s U.S. generic business, amongst other factors, as catalysts for the call. The stock fell below its 50 and 100- day moving averages. Seagate Technology (STX) reported fiscal Q4 adjusted EPS of $0.65, falling well short of analyst estimates of $0.98. The company also missed on revenue, posting $2.41Bn versus expectations of $2.56Bn. Weakness in the systems and enterprise business segments, along with inventory issues drove the miss. The firm is planning additional restructuring and is said to cut 600 jobs. Current COO Dave Mosley will become the new CEO and Steve Luczo will transition to Executive Chairman. Valeant Pharmaceuticals (VRX) announced the U.S. launch of their SILIQ injection which is used to treat psoriasis in adult patients. Separately, Wells Fargo came out with a note stating UnitedHealth Group (UNH) will no longer cover Valeant’s Solodyn and Retin-A brands, which represent approximately $214M of VRX’s 2016 sales. United Continental (UAL) continued its slide as U.S. airline stocks are poised to have their worst month in over a year.
Exhibit 3: Significant Detractors from Performance, 7/21/17 – 7/28/17
| Name | Type | Return |
| RH | Equity | -5.7% |
| Endo Pharmaceutical Holdings | Equity | -10.9% |
| Seagate Technology | Equity | -17.6% |
| Valeant Pharmaceuticals International | Equity | -3.8% |
| United Continental Holdings | Equity | -5.2% |
Source: Miller Value Partners
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
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