February 18, 2020

Opportunity Equity Update for Week Ended 2/14/20

OneMain Gains After 4Q Results While Quotient Falls on 2020 Guidance  

Last week, the Opportunity Equity strategy gained 2.50%, outperforming the S&P 500’s 1.65% rise (Exhibit 1). The strategy ended the week up 3.05% YTD, or 182 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 2/14/201

Time Period Opportunity Equity S&P 500
Last Week (2/7 – 2/14) 2.50% 1.65%
MTD 5.70% 4.91%
QTD 3.05% 4.87%
YTD 3.05% 4.87%
Inception (annualized since 6/26/00) 7.59% 6.45%

Source: Bloomberg, Miller Value Partners

Stitch Fix Inc. (SFIX) crossed above the 50 and 200-day moving average after presenting at the Goldman Sachs Technology and Internet Conference where it spoke to the early success of Direct Buy. OneMain Holdings Inc. (OMF) reported 4Q results which beat the highest estimates. The company reported adjusted EPS of $1.96 vs $1.74 expected with net charge-offs of 5.71% vs. 6.30% last year. The company increased their regular quarterly dividend to $0.33 and announced a special dividend of $2.50. Brighthouse Financial Inc. (BHF) gained after reporting EPS of $2.61 ($2.46 excluding notable items) which beat consensus of $2.33. Variable annuity assets above CTE98 increased to $1.7B from $1.5B along with the life insurance business earning $24M above consensus due to lower claims partially offset by lower net investment income. The company completed a $128M buyback and announced a new repurchase authorization of $500M. Brighthouse changed its hedging program which should reduce capital volatility and free up additional cash and capital for growth and buybacks. RH (RH) crossed above the 50-day moving average while Genworth Financial Inc. (GNW) crossed above the 50, 100 and 200-day moving average. Genworth MI Canada announced that it had agreed to issue $300M of debentures with the proceeds being used for the potential redemption, refinancing and repayment of its outstanding 5.68% debentures due June 15, 2020.

Exhibit 2: Significant Contributors to Performance, 2/7/20 – 2/14/20

Name Type Return
Stitch Fix Inc. Equity 13.7%
OneMain Holdings Inc. Equity 9.5%
Brighthouse Financial Inc. Equity 10.5%
RH Equity 10.3%
Genworth Financial Inc. Equity 12.6%

Source: Miller Value Partners

Quotient Technology Inc. (QUOT) fell below the 50-day moving average after reporting 4Q results. The company reported 4Q revenue of $118.5M beating consensus of $109.5M with EBITDA of $11.5M ahead of consensus of $10.2M. The company guided for 1Q revenue of $106-109M (consensus of $107.4M) with adjusted EBITDA of $1-3M (consensus of $9.6M) and 2020 revenue of $485-495M (consensus $485.2M) with adjusted EBITDA of $58-62M (consensus of $63M). Flexion Therapeutics (FLXN) crossed below the 100-day moving average. Morgan Stanley lowered their price target on Bausch Health Companies Inc. (BHC) to $32 from $34, upside of 15%, but maintained and overweight rating. There was minimal news on Endo International (ENDP) and Centennial Resource Development Inc. (CDEV).

Exhibit 3: Significant Detractors from Performance, 2/7/19 – 2/14/20

Name Type Return
Quotient Technology Inc. Equity -8.0%
Endo International plc Equity -3.6%
Flexion Therapeutics Equity -3.1%
Centennial Resource Development Inc. Equity -10.9
Bausch Health Companies Inc. Equity -1.5%

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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