February 25, 2019

Opportunity Equity Update for Week Ended 2/22/19

Avon Up on Sale of China Manufacturing Plant While Bausch Down on 2019 Guidance

Last week, the Opportunity Equity strategy gained 0.67%, outperforming the S&P 500’s 0.65% rise (Exhibit 1). The strategy ended the week up 21.33% YTD, or 959 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 2/22/191

Time Period Opportunity Equity S&P 500
Last Week (2/15 – 2/22) 0.67% 0.65%
MTD 2.71% 3.45%
QTD 21.33% 11.74%
YTD 21.33% 11.74%
Inception (annualized since 6/26/00) 7.24% 5.60%

Source: Bloomberg, Miller Value Partners

Avon Products Inc. (AVP) announced a partnership with Fuse Universal to create a global training platform for its independent sales representatives. The company also announced the completion of the sale of its China Manufacturing facility for $47M to TheFaceShop Co. Ziopharm Oncology Inc. (ZIOP) and Pulte Group Inc. (PHM) crossed above the 200-day moving average. There was minimal news on Brighthouse Financial Inc. (BHF) and Lennar Corp. (LEN).

Exhibit 2: Significant Contributors to Performance, 2/15/19 – 2/22/19

Name Type Return
Avon Products Inc. Equity 23.0%
Ziopharm Oncology Inc. Equity 17.0%
Pulte Group Inc. Equity 3.2%
Brighthouse Financial Inc. Equity 2.7%
Lennar Corp. Equity 2.8%

Source: Miller Value Partners

Bausch Health Companies (BHC) crossed below the 100-day moving average after releasing 4Q results which beat expectations but disappointed on guidance. The company reported 4Q Revenue of $2.12B beating consensus of $2.08B, EBITDA of $858M compared to the Street at $824M and EPS of $1.03 versus $0.84 expected. The company guided for 2019 revenue of $8.3-8.5B below consensus at the midpoint ($8.4B vs. $8.47B), EBITDA of $3.35-3.5B (consensus $3.43B), and operating cash flow of $1.5-1.6B. The company reiterated long-term guidance of a 3-year revenue CAGR of 4-6% and EBITDA CAGR of 5-8%. Genworth Financial Inc. (GNW) crossed below the 100 and 200-day moving average. Teva Pharmaceuticals (TEVA) was downgraded by Mizuho to Neutral with a price target of $18, 4% upside, citing risk to long-term outlook. The FDA ruled that Orphan Drug Exclusivity (ODE) for Bendeka/Treanda will be upheld until expiration on December 7, 2022 meaning no generic versions will be available until then. Teva had been modeling a generic entrant starting in late 2019. CenturyLink Inc. (CTL) was cut to Sector Perform at RBC citing lessened appeal due to the dividend cut and giving a price target of $15, upside of 12%. The stock was raised to neutral at MoffettNathanson with a price target of $12, downside of 11%. Southeastern Asset Management built a 6.2% position in CTL and is seeking to add directors to the board and is pushing for asset sales. There was minimal news on Endurance International Group Holdings (EIGI).

Exhibit 3: Significant Detractors from Performance, 2/15/19 – 2/22/19

Name Type Return
Bausch Health Companies Equity -6.7%
Genworth Financial Inc. Equity -5.5%
Teva Pharmaceuticals Equity -4.1%
CenturyLink Inc. Equity -2.2%
Endurance International Group Holdings Equity -3.7%

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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