March 30, 2020

Opportunity Equity Update for Week Ended 3/27/20

Airlines Climb on CARE Act Passage While Stitch Fix Down on Warehouse Closures

Last week, the Opportunity Equity strategy gained 15.51%, outperforming the S&P 500’s 10.28% gain (Exhibit 1). The strategy ended the week down -38.02% YTD, or 1,706 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/27/201

Time Period Opportunity Equity S&P 500
Last Week (3/20 – 3/27) 15.51% 10.28%
MTD -28.14% -13.84%
QTD -38.02% -20.96%
YTD -38.02% -20.96%
Inception (annualized since 6/26/00) 4.81% 4.90%

Source: Bloomberg, Miller Value Partners

RBC lowered their price target on Brighthouse Financial Inc. (BHF) to $24 from $50 and maintained a market perform rating. United Airlines Holding Inc. (UAL) and Delta Air Lines Inc. (DAL) rose following the passage of the Coronavirus Aid, Relief, and Economic Security Act (the CARES act) which will provide airlines with up to $33B in grants to make payroll, $29B in loans should other sources of liquidity be tapped out as well as waiving federal excise and fuel taxes. ADT Inc. (ADT) announced an increase of their buyback program by $75M to a total plan of $225M expiring in March 2021. There was minimal news on Tivity Health Inc. (TVTY).

Exhibit 2: Significant Contributors to Performance, 3/20/20 – 3/27/20

Name Type Return
Brighthouse Financial Inc. Equity 56.5%
United Airlines Holdings Inc. Equity 33.9%
Tivity Health Inc. Equity 84.1%
Delta Air Lines Inc. Equity 38.3%
ADT Inc. Equity 21.6%

Source: Miller Value Partners

Stitch Fix Inc. (SFIX) warned of order delays after government mandates forced them to close two distribution centers in California and Pennsylvania. Normua maintained their buy rating with a price target of $18, upside of 42%. Energy Transfer LP (ET) continued to be under pressure but RBC came out with a positive note reiterating their Outperform rating with a price target of $11, upside of 131%. CVS Health Corp. (CVS) announced its plans to hire 50k workers to help tackle the surging demand for drugstore services and health goods during the continuing coronavirus outbreak. CVS launched a $4B bond offering in what the company described as a proactive move to provide a liquidity cushion if needed. The company reiterated their goal of reaching net leverage below 3x by 2022. Citi cut their price target for GTY Technology (GTHY) to $4.50 from $6.00. There was minimal news on Ziopharm Oncology (ZIOP).

Exhibit 3: Significant Detractors from Performance, 3/20/20 – 3/27/20

Name Type Return
Stitch Fix Inc. Equity -12.9%
Energy Transfer LP Equity -9.1%
CVS Health Corp. Equity 0.4%
Ziopharm Oncology Inc. Equity -0.8%
GTY Technology Inc. Equity -2.0%

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.

©2019 Miller Value Partners, LLC

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