March 9, 2020

Opportunity Equity Update for Week Ended 3/6/20

Genworth Up on NYC Agreement in Principal While Brighthouse Declines on Fed Rate Cut

Last week, the Opportunity Equity strategy lost -5.49%, underperforming the S&P 500’s 0.65% incline (Exhibit 1). The strategy ended the week down -18.49% YTD, or 1082 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/6/201

Time Period Opportunity Equity S&P 500
Last Week (2/28 – 3/6) -5.49% 0.65%
MTD -5.49% 0.65%
QTD -18.49% -7.67%
YTD -18.49% -7.67%
Inception (annualized since 6/26/00) 6.29% 5.75%

Source: Bloomberg, Miller Value Partners

Genworth Financial Inc. (GNW) crossed above the 50, 100, and 200-day moving average after announcing that they had reached an agreement in principal with the New York State Department of Financial Services on terms that could bring the regulatory agency’s approval of Oceanwide’s proposed purchase of Genworth Life Insurance Company of New York. The company is expecting the transaction to close around March 31st. CVS Health Corp. (CVS) crossed above the 200-day moving average. Over the week, the company announced the divestment of their Coventry’s Workers’ Comp Services, which is a division of Aetna. The stock was further supported by Joe Biden’s stronger than expected results during Super Tuesday. Lennar Corp. (LEN) crossed above the 100-day moving average following the Federal Reserve’s emergency 0.5% rate cute. Ziopharm Oncology (ZIOP) gained over the week after announcing 4Q results. The company reported a loss per share of -$0.09 below consensus of -$0.08 with enough cash on hand to fund operations through mid-2022. The company continues to push forward on their TCR-T and CAR-T initiatives. Cantor Fitzgerald initiated on the name with an overweight rating and a price target of $6, upside of 85%. There was minimal news on Farfetch Ltd (FTCH).

Exhibit 2: Significant Contributors to Performance, 2/28/20 – 3/6/20

Name Type Return
Genworth Financial Inc. Equity 13.1%
CVS Health Corp. Equity 8.4%
Lennar Corp Equity 3.7%
Ziopharm Oncology Equity 5.2%
Farfetch Ltd Equity 2.0%

Source: Miller Value Partners

Endo International (ENDP) fell below the 100-day moving average. Brighthouse Financial Inc. (BHF) fell over the week as the Federal Reserve cut interest rates by 0.5%. The company held their business update call where they called out expected cash flows over a 10 year period with the base cash flow generation at around $1B annually, with the low market return assumption generating $425M annually. The company is shifting to less capital-intensive annuities and raised its 2021 annuity sales target to $8.5B+, from $8.0B+ previously. Teva Pharmaceuticals (TEVA) fell below the 50-day moving average as investors became concerned with Teva’s potential liability in the price fixing investigation. Sandoz announced that it had reached a resolution with the US Department of Justice (DOJ) Antitrust Division regarding ~3 year antitrust investigation of the US generic drug industry agreeing to pay $195M with an additional $185M provision for possible settlement with DOJ civil division. It is still unclear what TEVA’s liabilities would be. American Airlines Group Inc. (AAL) continued to decline on fears of the coronavirus. There was minimal news on Quotient Technology Inc. (QUOT).

Exhibit 3: Significant Detractors from Performance, 2/28/19 – 3/6/20

Name Type Return
Endo International Equity -16.7%
Brighthouse Financial Inc. Equity -16.9%
Teva Pharmaceuticals Equity -10.7%
American Airlines Group Inc. Equity -16.3%
Quotient Technology Inc. Equity -10.8%

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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