November 4, 2019

Opportunity Equity Update for Week Ended 11/1/19

Bausch Gains on New Outperform Rating While Lennar and Pulte Fall

Last week, the Opportunity Equity strategy rose 3.38%, outperforming the S&P 500’s 1.49% gain (Exhibit 1). The strategy ended the week up 24.10% YTD, or 26 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 11/1/191

Time Period Opportunity Equity S&P 500
Last Week (10/25 – 11/1) 3.38% 1.49%
MTD 2.21% 0.98%
QTD 9.82% 3.16%
YTD 24.10% 24.36%
Inception (annualized since 6/26/00) 7.10% 5.98%

Source: Bloomberg, Miller Value Partners

Bausch Health Companies Inc. (BHC) gained over the week after Cowen initiated on the name with an outperform rating and a price target of $35, upside of 35%. OneMain Holdings Inc. (OMF) rose after reporting 3Q results which beat expectations. The company reported core earnings of $1.77 ahead of consensus of $1.58, driven by higher NIM with net interest income of $822M ahead of consensus of $789.2m. Credit and receivables growth was better than expected with ending net receivables of $17.8B while net charge-offs totaled 5.2%. The company revised full year 2019 ending net receivables guidance of 12-14% up from 8-10% previously. Flexion Therapeutics (FLXN) announced the FDA clearance of its investigational new drug application for FX201, a gene therapy candidate for the treatment of Osteoarthritis. NXP Semiconductors (NXPI) crossed above the 50-day moving average after reporting strong 3Q results. The company reported revenue of $2.27B ahead of consensus of $2.24B with slightly lower operating expenses ($531m vs. $537m expected) leading to an EPS of $2.02 beating the Street at $1.93. The company guided for 4Q revenue of $2.24-2.3B in line with the Street at $2.27B with gross margin of 54.2% vs 54.4% expected and operating expenses of $545M vs. $543M leading to EPS of $2.00 versus the Street at $2.07. Bernstein raised their price target on NXPI to $135, upside of 14%. Tivity Health Inc. (TVTY) gained after announcing a pilot program with Walmart Health.

Exhibit 2: Significant Contributors to Performance, 10/25/19 – 11/1/19

Name Type Return
Bausch Health Companies Inc. Equity 10.2%
OneMain Holdings Inc. Equity 11.5%
Flexion Therapeutics Equity 13.3%
NXP Semiconductors Equity 11.5%
Tivity Health Inc. Equity 13.2%

Source: Miller Value Partners

Lennar Corp. (LEN) and Pulte Group Inc. (PHM) were down over the week as September existing home sales fell 2.2% sequentially below the Street’s estimate for a 0.7% decline with new home sales falling 0.7% sequentially above the street’s outlook for a 1.6% decline. There was minimal news on RH (RH), Stitch Fix Inc. (SFIX), and American Airlines Group Inc. (AAL).

Exhibit 3: Significant Detractors from Performance, 10/25/19 – 11/1/19

Name Type Return
RH Equity -6.8%
Lennar Corp. Equity -1.5%
Stitch Fix Inc. Equity -1.3%
American Airlines Group Inc. Equity -1.0%
Pulte Group Inc. Equity -1.0%

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. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

©2019 Miller Value Partners, LLC

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