April 27, 2020

Opportunity Equity Update for Week Ended 4/24/20

Energy Transfer Gains on Storage Announcement While Boeing Declines on MAX Cancellations

Last week, the Opportunity Equity strategy gained 0.05%, outperforming the S&P 500’s -1.30% decline (Exhibit 1). The strategy ended the week down -31.23% YTD, or 1,957 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 4/24/201

Time Period Opportunity Equity S&P 500
Last Week (4/17 – 4/24) 0.05% -1.30%
MTD 12.64% 9.88%
QTD 12.64% 9.88%
YTD -31.23% -11.66%
Inception (annualized since 6/26/00) 5.34% 5.47%

Source: Bloomberg, Miller Value Partners

Energy Transfer LP (ET) gained over the week despite crude prices on the May contract closing negative at the start of the week with June contracts moving into the teens. The company announced plans to use two idled pipelines in Texas to store up to 2 million barrels of crude by mid-May. Facebook Inc. (FB) gained over the week in sympathy with Snap, after Snap announced a blowout quarter that showed stronger ad revenues than expected. Facebook announced an investment of $5.7B (10% stake) in India’s top telecom operator Reliance Joi, which has more than 388m subscribers. Precigen Inc. (PGEN) crossed above the 50-day moving average as the company announced the FDA had cleared the IND for PRGN-2009, a cancer immunotherapy candidate for HPV+ solid tumors. Farfetch Ltd (FTCH) continued to move higher during the week. UBS raised their price target on the company to $16, up from $15, 29% upside. There was minimal news on Flexion Therapeutics (FLXN).

Exhibit 2: Significant Contributors to Performance, 4/17/20 – 4/24/20

Name Type Return
Energy Transfer LP Equity 16.7%
Facebook Inc. Equity 6.0%
Precigen Inc. Equity 19.1%
Farfetch Ltd Equity 3.3%
Flexion Therapeutics Equity 9.8%

Source: Miller Value Partners

Boeing Co. (BA) declined over the week as a Chinese aircraft lessor canceled 29 orders for the MAX, which brings total MAX cancellations to >250 for the year. Benchmark cut their price target on Boeing to $180, down from $375, 40% upside. The company reported that Greg Smith, CFO would lead a new group,  called Enterprise Operations, Finance & Strategy, which consolidates BA’s supply chain operations, finance and enterprise services. The new group has been tasked with the restoration of production and supply chain health as the aerospace industry recover from the COVID-19 pandemic. The Wall Street Journal published a report discussing how the coronavirus is expected to prolong regulatory approval for the 737 MAX. United Airlines Holdings Inc. (UAL) declined after announcing preliminary 1Q results. The company reported an adjusted pre-tax loss of -$1B on $8B of revenues, -17% YoY. The company also raised $1B in equity by selling 39.25m shares at a price of $26.50 resulting in dilution of roughly 15%. OneMain Holdings Inc. (OMF) provided a business update stating that it had $4.2B of cash and $3.6B of undrawn conduit lines at quarter end. Delta Air Lines Inc. (DAL) reported 1Q results with EPS of -$0.51, in-line with consensus. The company guided for June revenue to be down 90% YoY and announced another $1B cut to CAPEX for a total cut of $3B so far this year. The company ended the quarter with $6B in liquidity and they expect to end the June quarter with $10B in liquidity. Later in the week, the company raised $3B through a $1.5B senior secured note due 2025 offering and a new $1.5B term loan B facility due 2023. There was minimal news on Genworth Financial Inc. (GNW).

Exhibit 3: Significant Detractors from Performance, 4/17/20 – 4/24/20

Name Type Return
Boeing Co. Equity -16.3%
United Airline Holding Inc. Equity -12.2%
OneMain Holdings Inc. Equity -8.3%
Delta Air Lines Inc. Equity -7.4%
Genworth Financial Inc. Equity -6.0%

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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