February 19, 2019

Opportunity Equity Update for Week Ended 2/15/19

Brighthouse Financial Gains on 4Q Results While Newell Brands Declines on 2019 Guidance

Last week, the Opportunity Equity strategy gained 4.01%, outperforming the S&P 500’s 2.56% rise (Exhibit 1). The strategy ended the week up 20.52% YTD, or 950 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 2/15/191

Time Period Opportunity Equity S&P 500
Last Week (2/8 – 2/15) 4.01% 2.56%
MTD 2.02% 2.78%
QTD 20.52% 11.02%
YTD 20.52% 11.02%
Inception (annualized since 6/26/00) 7.21% 5.57%

Source: Bloomberg, Miller Value Partners

Brighthouse Financial Inc. (BHF) crossed above the 100 and 200-day moving average after announcing Q4 results which beat expectations. The company reported 4Q EPS of $1.68 excluding non-recurring items, ahead of consensus of $1.54. The Variable Annuities business finished the year with assets in excess of CTE98 at around $300M and statutory adjusted capital increased to $7.4B from $6.0B in Q3. The company expects low double-digit EPS growth in 2019 with corporate expenses to be flat-to-down slightly in 2019. OneMain Holdings Inc. (OMF) crossed above the 200-day moving average after releasing 4Q results and initiating a dividend. The company reported fourth quarter results with core EPS of $1.39 ahead of consensus of $1.33. The company guided for +3% YoY cost growth, +5-10% loan growth, yield to stay at 2018 levels, improving net charge off rate less than 6.5% and lower tangible leverage. The company initiated a dividend of $0.25 per share, a yield of 3%. Quotient Technology Inc. (QUOT) gained after announcing results that were in-line with its prior pre-release Q4 results. The company brought in revenues of $107M (15% YoY growth) in-line with consensus with adjusted EBITDA of $16.5M in-line. The company expects 2019 revenue of $460-470M (vs. consensus $482M) and adjusted EBITDA of $66-71M (vs. consensus $76.5M). NXP Semiconductors (NXPI) crossed above the 200-day moving average. The company presented at the Goldman Sachs Technology and Internet Conference where it reiterated its view that it is seeing signs of stabilization in its business, particularly in China, industrial and automotive. The company also reiterated its 7-10% revenue growth CAGR for its automotive business. There was minimal news on RH (RH).

Exhibit 2: Significant Contributors to Performance, 2/8/19 – 2/15/19

Name Type Return
Brighthouse Financial Inc. Equity 18.9%
OneMain Holdings Inc. Equity 13.1%
RH Equity 8.2%
Quotient Technology Inc. Equity 8.3%
NXP Semiconductors Equity 6.3%

Source: Miller Value Partners

Newell Brands Inc. (NWL) crossed below the 100-day moving average after announcing 4Q results and presenting disappointing 2019 guidance. The company reported normalized 4Q EPS of $0.71 vs. Street $0.67 with FCF of $388M vs. Street $676M. The company guided for FY19 EPS of $1.50-1.65 below consensus of $1.91 with net sales of $8.2-8.4B versus expectations of $8.8B and cash from operations of $300-500m below the Street $758M. The company also lowered its expectations for divestiture proceeds to $9B from $10B. Facebook Inc. (FB) crossed below the 200-day moving average. CenturyLink Inc. (CTL) declined after reporting 4Q results and cutting the dividend to $1/share from $2.16/share, a yield of 7%. The company reported EPS of $0.37 ahead of consensus of $0.32. The company guided for 2019 adjusted EBITDA of $9.0-9.2B vs. consensus of $9.08B and FCF of $3.25B at the midpoint versus consensus at $3.28B. The company is focused on bringing its leverage down to 2.75-3.25x over the next three years. There was minimal news on American Airlines Group Inc. (AAL) and Genworth Financial Inc. (GNW).

Exhibit 3: Significant Detractors from Performance, 2/8/19 – 2/15/19

Name Type Return
Newell Brands Inc. Equity -16.7%
Facebook Inc. Equity -2.9%
CenturyLink Inc. Equity -3.3%
American Airlines Group Inc. Equity -2.6%
Genworth Financial Inc. Equity -1.3%

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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