May 26, 2020

Opportunity Equity Update for Week Ended 5/22/20

RH Gains on JPMorgan Report While Alibaba Falls on Senate Bill

Last week, the Opportunity Equity strategy gained 9.12%, outperforming the S&P 500’s 3.27% return (Exhibit 1). The strategy ended the week down -21.32% YTD, or 1,355 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 5/22/201

Time Period Opportunity Equity S&P 500
Last Week (5/15 – 5/22) 9.12% 3.27%
MTD 3.99% 1.67%
QTD 28.88% 14.71%
YTD -21.32% -7.77%
Inception (annualized since 6/26/00) 6.04% 5.68%

Source: Bloomberg, Miller Value Partners

RH (RH) crossed above the 100 and 200-day moving average after JPMorgan published a report noting that RH should generate surplus cash as long as sales do not decline further than 50% YoY. Management had noted that sales were down ~40% until March 29th. Lennar Corp. (LEN) crossed above the 100 and 200-day moving average while Taylor Morrison Home Corp. (TMHC) also gained in sympathy with Meritage Homes which announced April orders down -15% better than the -25% to -30% expected with May expected to be flat. April total housing starts fell 30.2% sequentially to 891k below the Street at -26% to 900k but total building permits came in better to down -20.8% to 1,074k vs. -25.9% to 1,000k expected. Ziopharm Oncology Inc. (ZIOP) crossed above the 100-day moving average. Facebook Inc. (FB) climbed over the week after announcing the formal launch of Shops, which are free online store fronts for retailers starting on Facebook Blue and expanding to Instagram, WhatsApp, and Messenger.

Exhibit 2: Significant Contributors to Performance, 5/15/20 – 5/22/20

Name Type Return
RH Equity 28.1%
Lennar Corp. Equity 18.7%
Taylor Morrison Home Corp. Equity 23.3%
Ziopharm Oncology Inc. Equity 26.9%
Facebook Inc. Equity 11.4%

Source: Miller Value Partners

The following comprised last week’s only detractors. Peloton Interactive Inc. (PTON)’s price target was raised to $60 from $52, upside of 31%, at SunTrust. John Foley, CEO, said the company is considering offering a cheaper version of its fitness bike in the coming years. Alibaba Group Holdings Ltd (BABA) reported 4QFY20 revenues of CNY 114.3B up 22% YoY and ahead of consensus of CNY 107B with EBITDA coming in at CNY 25.4B beating consensus of CNY 22B leading to an EPS of CNY 9.20 vs. CNY 6.07 expected. The company guided for FY21 revenue to over CNY 650B slightly below consensus of CNY 657B. Management noted that Taobao+Tmall GMV growth was already back to December quarter levels (~19% GMV growth) with Tmall growth accelerating to 29% YoY. The stock fell after the US Senate passed a bill that could eventually put their US exchange listing at risk. Discovery Inc. (DISCA) announced the pricing terms of its previously-announced cash tender offer for certain outstanding senior notes issued by DCL and SNI validly tendering $1.5B of notes. There was minimal news on Farfetch Ltd (FTCH).

Exhibit 3: Significant Detractors from Performance, 5/15/20 – 5/22/20

Name Type Return
Peloton Interactive Inc. Equity -5.4%
Farfetch Ltd Equity -1.8%
Alibaba Group Holdings Ltd Equity -2.0%
Discovery Inc. Equity -0.9%

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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