January 7, 2019

Opportunity Equity Update for Week Ended 1/4/19

Celgene Gains on Take-Out Bid from Bristol-Myers Squibb While Delta Falls on Lower 4Q Revenue Guidance

Last week, the Opportunity Equity strategy gained 6.79%, outperforming the S&P 500’s 1.90% rise (Exhibit 1). The strategy ended the week up 6.66% YTD, or 563 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 1/4/191

Time Period Opportunity Equity S&P 500
Last Week (12/28 – 1/4) 6.79% 1.90%
MTD 6.66% 1.03%
QTD 6.66% 1.03%
YTD 6.66% 1.03%
Inception (annualized since 6/26/00) 6.55% 5.07%

Source: Bloomberg, Miller Value Partners

Celgene Corp. (CELG) crossed above the 50, 100 and 200-day moving average after Bristol-Myers Squibb (BMY) announced their proposed acquisition of Celgene for $50 in cash per share and 1 share of the combined company for an approximate total value of $102.43 per CELG share (based on BMY closing price 1/2/19). There is potential for an additional $9/share if ozanimod, liso-cel and bb2121 are approved by the FDA by stated deadlines. Bausch Health Companies (BHC) was upgraded to overweight at Piper Jaffray with a price target of $27, upside of 20%. Endo International (ENDP) reported that the FDA requested litigation to be stayed during the government shutdown. Amazon.com Inc. (AMZN) announced that it was planning to build and expand Whole Foods stores across the US to put more customers within range of its two-hour delivery service, Prime Now. The company also announced that it has sold more than 100m Alexa-enabled devices. Teva Pharmaceuticals (TEVA) was upgraded to a buy at Bank of America with a price target of $20, upside of 26%.

Exhibit 2: Significant Contributors to Performance, 12/28/18 – 1/4/19

Name Type Return
Celgene Corp. Equity 36.0%
Bausch Health Companies Equity 13.1%
Endo International Equity 11.8%
Amazon.com Inc. Equity 6.6%
Teva Pharmaceuticals Equity 10.7%

Source: Miller Value Partners

Delta Air Lines Inc. (DAL) fell over the week after the company updated 4Q guidance. The company reduced its unit revenue (RASM) outlook to +3% from the +3.5% announced last month and the original guidance of +3-5%. The company also updated 4Q18 EPS to $1.25-1.30 compared to prior guidance of $1.10-1.30. RH (RH) formed a death cross as the 50-day moving average fell below the 200-day moving average. United Continental Holdings (UAL) fell in sympathy with Delta. Qualcomm Inc. (QCOM) headed to trial against the FTC. There was minimal news on GTY Technology Holdings (GTYHU).

Exhibit 3: Significant Detractors from Performance, 12/28/18 – 1/4/19

Name Type Return
Delta Air Lines Inc. Equity -4.8%
RH Equity -0.9%
United Continental Holdings Equity -0.6%
Qualcomm Inc. Equity -0.4%
GTY Technology Holdings Equity 0.0%

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.

©2018 Miller Value Partners, LLC

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