March 25, 2019

Opportunity Equity Update for Week Ended 3/22/19

Micron Gains on Earnings While Financials Fall on Fed Decision

Last week, the Opportunity Equity strategy lost -1.83%, underperforming the S&P 500’s -0.75% loss (Exhibit 1). The strategy ended the week up 14.33% YTD, or 207 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/22/191

Time Period Opportunity Equity S&P 500
Last Week (3/15 – 3/22) -1.83% -0.75%
MTD -4.46% 0.70%
QTD 14.33% 12.26%
YTD 14.33% 12.26%
Inception (annualized since 6/26/00) 6.87% 5.61%

Source: Bloomberg, Miller Value Partners Inc. (AMZN) crossed above the 200-day moving average. Evecore ISI put a buy rating on the stock with a price target of $1,965, upside of 11%. Micron Technology Inc. (MU) gained over the week after releasing 2Q results. The company reported revenue of $5.84B compared to consensus at $5.88B with EPS of $1.71 compared to $1.60 expected. The company guided for 3Q revenue of $4.6-5.0B below consensus of $5.52B and EPS of $0.75-0.95 below consensus of $1.32 with expectations to be FCF positive and returning 50% of FCF to shareholders. Management guided DRAM bit shipment up Q/Q but guided NAND shipments modestly down Q/Q. The company expects NAND oversupply to persist through year-end. The company plans to idle 5% of its DRAM wafer starts and reduce NAND Flash wafer starts by 5%. The company further lowered its CAEPX guidance to $9B down from the $9-9.5B guided earlier. Avon Products Inc. (AVP) gained over the week after a report in the Wall Street Journal reported that AVP is considering a sale to Brazil’s Natura. Later in the day both Natura and AVP confirmed talks. Bank of America reinstates with an underperform rating on Bausch Health Companies Inc. (BHC) with a price target of $18, 27% downside. This follows Mizhuo raising its price target to $41, upside of 66%, earlier in the week. There was minimal news on Ziopharm Oncology (ZIOP).

Exhibit 2: Significant Contributors to Performance, 3/15/19 – 3/22/19

Name Type Return Inc. Equity 3.1%
Micron Technology Inc. Equity 5.3%
Ziopharm Oncology – Warrants Equity 28.2%
Avon Products Inc. Equity 4.8%
Bausch Health Companies Inc. Equity 3.0%

Source: Miller Value Partners

Financials fell over the week as the Fed voted to maintain its target rate range at 2.25-2.5% with the dot plot becoming more dovish leading to a flattening yield curve and continued lending spread compression. Brighthouse Financial Inc. (BHF) crossed below the 50 and 100-day moving average. Bank of America raised its price target for the company to $43, upside of 21%. Bank of America (BAC) fell below the 50, 100, and 200-day moving average while JPMorgan Chase & Co (JPM) fell below the 50 and 100-day moving average. OneMain Holdings Inc. (OMF) released February Trust Data that showed person loans net loss rate was 8.99% which was -3bps MoM with 30+ day delinquency rate in trust at 5.10% down -18bps MoM. SLFT had $1.9B in loans with an average net loss rate of 9.85% with a delinquency rate of 5.71% and OMFIT had $5.2B of loans with an average net loss rate of 8.68% and delinquency rate of 4.88%. Direct Auto loans had an annualized loss rate of 1.82%, up 10bps MoM. Stitch Fix Inc. (SFIX) fell below the 200-day moving average.

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

Name Type Return
Brighthouse Financial Inc. Equity -10.2%
Bank of America Corp. Equity -7.8%
OneMain Holdings Inc. Equity -6.3%
JPMorgan Chase & Co. Equity -6.4%
Stitch Fix Inc. Equity -14.2%

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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