March 2, 2020

Opportunity Equity Update for Week Ended 2/28/20

Peloton Up on At-Home-Fitness Focus from Coronavirus While American Airlines Down on Negative Travel Impact from Coronavirus

Last week, the Opportunity Equity strategy lost -14.06%, underperforming the S&P 500’s -11.44% decline (Exhibit 1). The strategy ended the week down -13.75% YTD, or 548 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 2/28/201

Time Period Opportunity Equity S&P 500
Last Week (2/21 – 2/28) -14.06% -11.44%
MTD -11.53% -8.23%
QTD -13.75% -8.27%
YTD -13.75% -8.27%
Inception (annualized since 6/26/00) 6.60% 5.72%

Source: Bloomberg, Miller Value Partners

Peloton Interactive Inc. (PTON) gained over the week as fears over the coronavirus lead some investors to start buying “stay at home” stocks. In China, reports showed increased demand for at-home workout products with investors extrapolating similar expectations for the US. Later in the week the company announced a settlement with The National Music Publishers’ Association over the use of songs in the company’s workout videos. Tivity Health Inc. (TVTY) rebounded slightly after plummeting -47% the week before after announcing disappointing earnings and the CEO departure. Over the week the company announced an agreement with HG Vora Capital Management, owners of 9.9% of shares outstanding, for two new independent board seats. Later in the week, the CEO and CFO as well as numerous directors purchased shares in the company. There were no other top contributors for the week.

Exhibit 2: Significant Contributors to Performance, 2/21/20 – 2/28/20

Name Type Return
Peloton Interactive Inc. Equity 4.5%
Tivity Health Inc. Equity 5.4%
Cash Cash 0.0%

Source: Miller Value Partners

American Airlines Group Inc. (AAL) fell over the week on increased fears of the coronavirus and the implications for travel related stocks. Some analysts published reports noting that the airlines may face 9/11 type demand shocks. Brighthouse Financial Inc. (BHF) crossed below the 50, 100, and 200-day moving average as investors became concerned with the potential earnings impact from low interest rates, resulting from the coronavirus headlines. In addition, some investors believe there is risk that the company will need to lower their long-term rate assumptions but do not see increased mortality assumptions as a risk. Coronavrius fears put pressure on OneMain Holdings Inc. (OMF) as it fell below the 50 and 100-day moving average. Investors see potential economic weakness resulting from coronavirus having a potential negative impact on delinquencies, although 52$ of their loans are secured. Evenbrite Inc. (EB) fell below the 50, 100, and 200-day moving average after reporting 4Q results. The company reported 4Q revenue of $82.7M ahead of consensus of $78.7M with adjusted EBITDA of -$2.2M in-line with expectations. The company guided for 1Q revenue of $84-88M vs. $90.2M expected and adjusted EBITDA of -$3M to -$1M versus $6.9M expected. For the full year the company expects revenue of $342-359M vs. $365.5M expected and adjusted EBITDA of -$4M to $0M below $13.9M consensus estimated. The guidance include anticipated coronavirus impacts. RH (RH) fell below the 50 and 100-day moving average as investors became concerned about the coronavirus’s impact on RH supply chain and customer demand.

Exhibit 3: Significant Detractors from Performance, 2/21/19 – 2/28/20

Name Type Return
American Airlines Group Inc. Equity -31.5%
Brighthouse Financial Inc. Equity -22.2%
OneMain Holdings Inc. Equity -18.4%
Eventbrite Inc. Equity -31.1%
RH Equity -23.3%

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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