Last week, Opportunity Equity strategy declined 0.49%, underperforming the S&P 500’s 0.09% gain (Exhibit 1). The strategy ended the week up 19.93% YTD, or 650 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 9/22/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (9/15 - 9/22) | -0.49% | 0.09% |
| MTD | 3.28% | 1.34% |
| QTD | -0.58% | 3.74% |
| YTD | 19.93% | 13.43% |
| Inception (annualized since 12/30/99) | 6.88% | 5.08% |
Source: Bloomberg, Miller Value Partners
Financials performed well over the week despite the Federal Reserve Open Market Committee (FOMC) announcing its plan to keep the federal funds rate unchanged, as the dot plot implied a rate hike in December which is more hawkish than expected. The FOMC also described its plan to start shrinking its balance sheet by $10B a month gradually rising over the next year to $50B a month. JPMorgan Chase & Co (JPM/WS) crossed above the 50-day moving average. OneMain Holdings (OMF) released August Trust loss data that showed improvement with the average personal loans net loss rate being 7.52% (-70bps m/m) and 30+ day delinquencies were 4.62% (+7bps m/m). Citigroup Inc. (C) released August credit card data that showed delinquencies rising with charge-offs coming in at 2.41% (34bps m/m) and 30+ day delinquencies increasing to 1.43% (4bps m/m). There was minimal news on MGIC Investment Corp. (MTG) and Endurance International Group Holdings (EIGI).
Exhibit 2: Significant Contributors to Performance, 9/15/17 – 9/22/17
| Name | Type | Return |
| JPMorgan Chase & Co. - Warrant | Derivative | 6.4% |
| MGIC Investment Corp. | Equity | 2.7% |
| Endurance International Group Holdings | Equity | 4.0% |
| OneMain Holding Inc. | Equity | 2.3% |
| Citigroup Inc. | Equity | 3.4% |
Source: Miller Value Partners
Apple Inc. (AAPL) call options fell below the 50 and 100-day moving average as pre-orders for the iPhone 8 were coming in lower than orders for the iPhone 7 and 6. Some analysts speculate that consumers are waiting for the iPhone X, for which Apple will not start accepting pre-orders until late October. Wayfair Inc. (W) fell after an academic paper was published that cited a fair value for Wayfair of $10/share but the merits of the report are being called into question. Amazon.com Inc. (AMZN) fell below the 50 and 100-day moving average. The company announced a pact with Olo to expand restaurant delivery service. Genworth Financial Inc. (GNW) fell over the week after Han Xiaosheng, Executive Director and President of Oceanwide Holdings said that getting the CFIUS’s approval by the end of the next month was difficult and that the company would try to close the deal by the end of this year. Allergan PLC (AGN) released mixed Phase IIb NASH data which demonstrated one-year anti-fibrotic efficacy and a clean safety profile but failed to show year 2 anti-fibrotic efficacy. The company was downgraded to equal-weight at Morgan Stanley with a price target of $228, upside of 11%.
Exhibit 3: Significant Detractors from Performance, 9/15/17 - 9/22/17
| Name | Type | Return |
| Apple Inc. C100 1/18 | Derivative | -14.0% |
| Wayfair Inc. | Equity | -6.5% |
| Amazon.com Inc. | Equity | -3.2% |
| Genworth Financial Inc. | Equity | -4.5% |
| Allergan PLC | Equity | -7.1% |
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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