The Intellectual Investor: Opportunity Equity Weekly Updates

May 22, 2017

Opportunity Equity Update for Week Ended 5/19/17

athenahealth rises after Elliott Management discloses 9.2% economic interest while Endo falls below the 100-day moving average

Last week, the Opportunity Equity strategy lost -1.29%, underperforming the S&P 500’s -0.32% fall (Exhibit 1). The strategy ended the week up 14.35% YTD, or 711 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Versus Equity Indices, Through 5/19/171

Time Period Opportunity Equity S&P 500
Last Week (5/12 – 5/19) -1.29% -0.32%
MTD 5.80% 0.08%
QTD 6.43% 1.10%
YTD 14.35% 7.24%
Inception (annualized since 12/30/99) 6.81% 4.85%

Source: Bloomberg, Miller Value Partners

athenahealth Inc. (ATHN) crossed above the 50-day, 100-day, and 200-day moving average after it was disclosed that Elliott Management had an “economic interest” of 9.2% in ATHN. KeyBanc Capital raised their price target on the stock to $145, upside of 11%. Quotient Technology (QUOT) crossed above the 100-day moving average mid-week and the company’s app won MediaPost’s Appy Award. Lennar Corp. (LEN) crossed above the 50-day moving average. Mizuho initiated coverage of the company with a buy rating and a price target of $59, 13% upside. RH (RH) announced the hiring of Sandra Stangl, the former President of Williams-Sonoma’s Pottery Barn brands, as its President of New Business Development and Prakash Muppirala as CTO and President of RH Digital Innovation, previously Senior Vice President at Staples and Director of Engineering at eBay. There was minimal news on United Continental Holdings (UAL).

Exhibit 2: Significant Contributors to Performance, 5/12/17 – 5/19/17

Name Type Return
athenahealth Inc. Equity 19.5%
Quotient Technology Inc. Equity 6.1%
Lennar Corp. Equity 3.5%
RH Equity 1.5%
United Continental Holdings Equity 2.1%

Source: Miller Value Partners

Endo Pharmaceuticals Holdings Inc. (ENDP) fell below the 100-day moving average. Apple Inc. (AAPL) was down for the week after it was announced that it had paid $200M to acquire AI startup Lattice Data. Qualcomm (QCOM) is now suing Apple’s contract manufacturers claiming they are failing to pay patent royalties. JPMorgan Chase & Co. (JPM/WS) disclosed April card charge-offs which increased to 2.60% from 2.47% in March while 30-day+ delinquencies and 90-day+ delinquencies declined to 1.17% and 0.59%, respectively. Pandora Media Inc. (P) was down over the week after it was announced that they had raised $150M by selling 5yr 8% convertible preferred securities to KKR. Pandora was removed from Goldman’s conviction buy list but it is still rated a buy with a price target of $16, 73% upside. Bank of America (BAC) fell below the 50-day and 100-day moving average. The company disclosed April charge-offs which increased by 0.01% to 2.80% from March, while 30-day+ delinquencies declined 0.04% to 1.57%.

Exhibit 3: Significant Detractors from Performance, 5/12/17 – 5/19/17

Name Type Return
Endo Pharmaceuticals Holdings Inc. Equity -12.5%
Apple Inc. C100 1/18 Derivative -4.5%
JPMorgan Chase & Co. – Warrants Derivative -4.6%
Pandora Media Inc. Equity -5.9%
Bank of America Corp. Equity -3.9%

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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