March 11, 2019

Opportunity Equity Update for Week Ended 3/8/19

Facebook Climbs After Mark Zuckerberg’s Memo While Endo and MNK Fall on Opioid Litigation Fears

Last week, the Opportunity Equity strategy lost -5.16%, underperforming the S&P 500’s -2.12% loss (Exhibit 1). The strategy ended the week up 13.69% YTD, or 382 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/8/191

Time Period Opportunity Equity S&P 500
Last Week (3/1 – 3/8) -5.16% -2.12%
MTD -4.99% -1.44%
QTD 13.69% 9.87%
YTD 13.69% 9.87%
Inception (annualized since 6/26/00) 6.86% 5.50%

Source: Bloomberg, Miller Value Partners

Facebook Inc. (FB) crossed above the 200-day moving average after Mark Zuckerberg posted a memo on his website titled, “A Privacy-Focused Vison for Social Networking.” The company plans to shift its focus towards private connections with encryption and plans to integrate Facebook Messenger, Instagram and WhatsApp. Pulte Group Inc. (PHM) crossed above the 50 and 200-day moving average while Lennar Corp. (LEN) crossed above the 200-day moving average. Household Formation (HHF) was released over the week showing another quarter of strong growth increasing +1.53m YoY versus +1.56m YoY in the previous quarter. For the full year, 2018 saw 1.5m households formed compared to 1.08m in 2017. Home ownership increased 1.7M YoY versus the 1.5m YoY increase seen in 3Q18. US December new home sales rose 3.7% to 621k annual rate beating expectations for an 8.7% decline to 600k. Allergan (AGN) crossed above the 50-day moving average. The company reported that Rapastinel failed all three acute studies and would likely fail the maintenance study. CEO, Brent Saunders, purchased 171k shares after the news. Delta Air Lines Inc. (DAL) crossed above the 50-day moving average. The company reaffirmed its full year EPS guidance of $6-7 and stated that it was on track to deliver March quarter margin and earnings guidance ($0.70-0.90). The company sees a solid revenue environment with 4-6% topline growth expected in March quarter and the full year.

Exhibit 2: Significant Contributors to Performance, 3/1/19 – 3/8/19

Name Type Return
Facebook Inc. Equity 4.5%
Pulte Group Inc. Equity 3.1%
Allergan PLC Equity 3.1%
Lennar Corp. Equity 1.5%
Delta Air Lines Inc. Equity 1.3%

Source: Miller Value Partners

Endo International plc (ENDP) crossed below the 50-day moving average while Mallinckrodt plc (MNK) crossed below the 100 and 200-day moving average. The stocks sold off after a report in Reuters claimed that Purdue Pharma was exploring filing for bankruptcy as a strategy to address the potential opioid-related liabilities. RH (RH) announced the promotion of Jack Preston, currently senior VP, finance and chief strategy officer, to CFO while current CFO, Ryno Blignaut will step down for health reasons. Avon Products Inc. (AVP) declined after Moody’s Investors Service downgraded the $500m senior secured notes due in 2022 to negative from stable and assigned a negative outlook. ADT Inc. (ADT) crossed below the 100-day moving average.

Exhibit 3: Significant Detractors from Performance, 3/1/19 – 3/8/19

Name Type Return
Endo International plc Equity -23.0%
RH Equity -10.1%
Avon Products Inc. Equity -16.3%
Mallinckrodt plc Equity -15.0%
ADT Inc. Equity -7.3%

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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