Last week, Opportunity Equity strategy advanced 0.14%, outperforming the S&P 500’s -0.58% decline (Exhibit 1). The strategy ended the week up 17.05% YTD, or 554 basis points ahead of the S&P 500.
Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 9/8/171
| Time Period | Opportunity Equity | S&P 500 |
| Last Week (9/1 - 9/8) | 0.14% | -0.58% |
| MTD | 0.81% | -0.38% |
| QTD | -2.97% | 1.98% |
| YTD | 17.05% | 11.51% |
| Inception (annualized since 12/30/99) | 6.75% | 4.99% |
Source: Bloomberg, Miller Value Partners
RH (RH) soared after posting Q2 EPS of $0.65 and revenues of $615.33M, both easily surpassing analyst estimates of $0.47 and $606.34M, respectively. The beat was driven by gross margins of 34.1%, sales growth of 13.9%, and comp growth of 7%. The company raised FY 2017 guidance where they see EPS from $2.43 to $2.67, up significantly from $1.67 to $1.94. The company also expects full-year FCF of $400M, which is meaningfully higher than estimates. The stock moved above its 50 and 100-day moving averages and was upgraded at multiple firms across the street, most notably at Buckingham who upgraded the stock to buy and raised their price target to $88, 28.7% upside. Wayfair (W) was upgraded to buy at Gordon Haskett with a price target of $89, 15.5% above where it currently trades. The stock closed the week above its 50-day moving average. Ortho Dermatologics, a division of Valeant Pharmaceuticals (VRX), announced they have submitted a New Drug Application to the FDA for IDP-118, a topical lotion to treat plaque psoriasis. The stock’s 100-day moving average moved above its 200-day moving average. There was no news on GameStop Corp (GME) or Quotient Technology (QUOT).
Exhibit 2: Significant Contributors to Performance, 9/1/17 – 9/8/17
| Name | Type | Return |
| RH | Equity | 45.6% |
| Wayfair, Inc. | Equity | 6.6% |
| GameStop Corp. | Equity | 4.6% |
| Valeant Pharmaceuticals Intl Inc. | Equity | 2.1% |
| Quotient Technology | Equity | 1.3% |
Source: Miller Value Partners
United Continental Holdings (UAL) updated its Q3 outlook where management lowered PRASM to -3% to -5% (previously -1% to +1%), as well as pretax margin to 8% to 10% (previously 12.5% to 14.5%). UAL raised fuel price per gallon to $1.72 to $1.77 (previously $1.56 to $1.61). The company cited Hurricane Harvey and geopolitical tensions as reasoning for the lower guidance. Imperial Capital lowered their price target on the stock from $77 to $60, in-line with where it currently trades. JPMorgan Chase (JPM) warrants fell below their 100-day moving average. The company announced it was starting a joint venture between its consumer and retail, and internet teams in an effort to increase their digital investment market share. There was no news on OneMain Financial (OMF) or Platform Specialty Products (PAH).
Exhibit 3: Significant Detractors from Performance, 9/1/17 - 9/8/17
| Name | Type | Return |
| *Recently Added Security* | Equity | -12.5% |
| United Continental Holdings | Equity | -6.5% |
| JPMorgan Chase & Co. - Warrant | Derivative | -5.9% |
| OneMain Holdings Inc. | Equity | -4.7% |
| Platform Specialty Products Corp. | Equity | -4.7% |
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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