December 23, 2019

Opportunity Equity Update for Week Ended 12/20/19

Medifast Gains on Take-out Rumors While Quotient Declines on New Sell Rating

Last week, the Opportunity Equity strategy gained 1.15%, underperforming the S&P 500’s 1.68% gain (Exhibit 1). The strategy ended the week up 35.32% YTD, or 427 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 12/20/191

Time Period Opportunity Equity S&P 500
Last Week (12/13 – 12/20) 1.15% 1.68%
MTD 1.83% 2.68%
QTD 19.74% 8.71%
YTD 35.32% 31.05%
Inception (annualized since 6/26/00) 7.53% 6.23%

Source: Bloomberg, Miller Value Partners

Medifast Inc. (MED) rose above the 50 and 100-day moving average after Bloomberg reported that Engaged Capital, which owns 15% of MED, is weighing a bid to take Medifast private. Micron Technology Inc. (MU) gained over the week after announcing FY1Q results which beat and providing FY2Q guidance that was below expectations but calling for the bottom in FY2Q. The company reported revenue of $5.14B ahead of the Street at $5B with EPS of $0.48 versus expectations of $0.46. The company guided for 2Q revenue of $4.65B below consensus of $4.76B with GM guidance of 27% ahead of consensus of 26.4% and EPS of $0.35 below consensus of $0.40. The company noted that they expect FY2Q to be the bottom for GMs as they expect better pricing, increasing mix of high-value solutions and cost reductions to improve margins. Facebook Inc. (FB) was named a top large cap pick for 2020 by Deutsche Bank as they increased their price target to $270, upside of 31%. Endo International (ENDP) crossed above the 200-day moving average while American Airlines Group Inc. (AAL) crossed above the 50 and 100-day moving average.

Exhibit 2: Significant Contributors to Performance, 12/13/19 – 12/20/19

Name Type Return
Medifast Inc Equity 16.2%
Micron Technology Inc. Equity 7.5%
Facebook Inc. Equity 6.3%
Endo International Equity 7.6%
American Airlines Group Inc. Equity 5.6%

Source: Miller Value Partners

Quotient Technology Inc. (QUOT) declined as Morgan Stanley initiated on the name with a sell rating and a price target of $8, downside of 21%. Bernstein raised their price target on Peloton Interactive Inc. (PTON) to $39 from $29, upside of 34%. Bausch Health Companies Inc. (BHC) settled its outstanding securities class action lawsuit for $1.21B. The company also announced FDA approval of Arazlo lotion for the treatment of acne vulgaris, representing the first tazarotene acne treatment in lotion form. The company plans to launch Arazlo in the first half of 2020. Flexion Therapeutics (FLXN) enrolled its first patients in Phase 2 trial of Zilretta in OA shoulder and adhesive capsulitis. The company is still waiting to hear back from the FDA on the revised labeling for Zilretta. There was minimal news on ADT Inc. (ADT).

Exhibit 3: Significant Detractors from Performance, 12/13/19 – 12/20/19

Name Type Return
ADT Inc. Equity -7.7%
Quotient Technology Inc. Equity -7.6%
Peloton Interactive Inc. Equity -4.9%
Bausch Health Companies Inc. Equity -3.2%
Flexion Therapeutics Equity -3.6%

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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