May 18, 2020

Opportunity Equity Update for Week Ended 5/15/20

Peloton Gains on 1M Connected Fitness Subs While Farfetch Declines on 1Q Results

Last week, the Opportunity Equity strategy

lost -5.97%, underperforming the S&P 500’s -2.20% decline (Exhibit 1). The strategy ended the week down -27.89% YTD, or 1,720 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 5/15/201

Time Period Opportunity Equity S&P 500
Last Week (5/8 – 5/15) -5.97% -2.20%
MTD -4.70% -1.54%
QTD 18.11% 11.08%
YTD -27.89% -10.69%
Inception (annualized since 6/26/00) 5.58% 5.51%

Source: Bloomberg, Miller Value Partners

Peloton Interactive Inc. (PTON) gained after filing an 8k that disclosed that the company had reached 1M connected fitness subscribers as of 5/11 tracking ahead of guidance on their most recent earnings call. ADT Inc. (ADT) crossed above the 100-day moving average after reporting 1Q results the week before. The company reported revenue of $1.37B ahead of consensus of $1.23B with adjusted EBITDA of $539M ahead of consensus of $509M with FCF of $173M ahead of consensus of $139M. For the full year, the company reiterated their topline guidance (revenue of $5-5.3B) but lowered EBITDA guidance to $2.075-2.175B down from $2.175-2.25B with a wider FCF range of $600-700M from $630-670M. The company saw positive net adds for the first time in 5 years. Inc. (AMZN) was rumored to have expressed buyout interest in AMC. The company also stated that deliveries were returning to normal after the initial hyper demand from COVID. Amazon held their annual AWS Summit online where Amazon CTO, Werner Vogels, discussed the acceleration in the secular shift to the cloud from COVID-19. Alibaba Group Holdings Ltd (BABA) gained after the National Bureau of Statistics of China reported that e-commerce sales of physical goods increase 16% YoY for April with online penetration coming in at 26%, a 550bp YoY gain. There was minimal news on Alibaba Group Holdings Ltd (BABA).

Exhibit 2: Significant Contributors to Performance, 5/8/20 – 5/15/20

Name Type Return
Stitch Fix Inc. Equity 21.7%
Peloton Interactive Inc. Equity 12.6%
ADT Inc. Equity 6.6% Inc. Equity 1.3%
Alibaba Group Holdings Ltd. Equity 1.2%

Source: Miller Value Partners

Farfetch Ltd (FTCH) declined after reporting 1Q results which were in-line with preliminary results. The company reported GMV growth of 46% on the high-end of their prior guidance of 43-46% with revenue of $331M beating consensus of $313M with EBITDA of -$22.3M ahead of consensus of -$27M. The company had active customer growth of 27% to 2.15M but they saw a lower average order size of $571. The company removed full year guidance but noted that they expect to see YoY growth in 2Q. United Airlines Holdings Inc. (UAL) workers filed a class action alleging the company violated Federal Aid rules. There was minimal news on NXP Semiconductors (NXPI), Tivity Health Inc. (TVTY) and DXC Technology Company (DXC).

Exhibit 3: Significant Detractors from Performance, 5/8/20 – 5/15/20

Name Type Return
Farfetch Ltd Equity -13.0%
United Airlines Holdings Inc. Equity -21.8%
NXP Semiconductors Equity -13.7%
Tivity Health Inc. Equity -15.6%
DXC Technology Company Equity -13.4%

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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