June 1, 2020

Opportunity Equity Update for Week Ended 5/29/20

Flexion Gains on Guggenheim Buy Rating While Ziopharm Falls as their President Leaves

Last week, the Opportunity Equity strategy gained 3.63%, outperforming the S&P 500’s 3.04% return (Exhibit 1). The strategy ended the week down -18.46% YTD, or 1,349 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 5/29/201

Time Period Opportunity Equity S&P 500
Last Week (5/22 – 5/29) 3.63% 3.04%
MTD 7.11% 4.76%
QTD 33.56% 18.19%
YTD -18.46% -4.97%
Inception (annualized since 6/26/00) 6.22% 5.83%

Source: Bloomberg, Miller Value Partners

Flexion Therapeutics (FLXN) gains as Guggenheim initiated coverage of the name with a price target of $20, upside of 75%. The CEO, Dr. Michael Clayman purchased 10.3k shares of the company’s common stock for a total value of ~$100k. RH (RH) gained as Citron released a report on the company calling for a $400 price target, upside of 84%, noting that they would be a clear winner of de-urbanization. Quotient Technology Inc. (QUOT) crossed above the 50-day moving average. There was minimal news on Medifast Inc. (MED) and ADT Inc. (ADT).

Exhibit 2: Significant Contributors to Performance, 5/22/20 – 5/29/20

Name Type Return
Medifast Inc. Equity 11.8%
ADT Inc. Equity 8.6%
Flexion Therapeutics Equity 17.0%
RH Equity 9.5%
Quotient Technology Inc Equity 12.6%

Source: Miller Value Partners

Ziopharm Oncology Inc. (ZIOP) fell below the 100-day moving average after the company announced the departure of David Mauney as President. He will continue to serve as a consultant. Facebook Inc. (FB) declined after President Trump signed an executive order that seeks to limit liability protections social media firms enjoy after Twitter began fact checks on his posts on the platform. DXC Technology Company (DXC) crossed below the 50-day moving average after the company announced FY4Q results. The company reported revenues of $4.815B below consensus of $4.871B with EBIT margins of 7.3% vs 8.9% expected and adjusted EPS of $1.07 ahead of consensus of $0.91. Total bookings slowed to $4.4B reflecting a book-to-bill of 0.91x down from 1.06x last quarter. The company did not provide formal FY21 guidance but does expect $550-700M in cost optimization to be realized this year with FY1Q being trough for revenues and EPS with revenue down 8-10% QoQ and adjusted EPS of $0.05-0.15 (Street at $1.10). The company also announced the suspension of its dividend. JPMorgan downgraded the stock to neutral with a $17 price target, 20% upside. There was minimal news on Peloton Interactive Inc. (PTON) and Precigen Inc. (PGEN).

Exhibit 3: Significant Detractors from Performance, 5/22/20 – 5/29/20

Name Type Return
Ziopharm Oncology Inc Equity -13.5%
Facebook Inc. Equity -4.2%
Peloton Interactive Inc. Equity -7.9%
DXC Technology Company Equity -8.2%
Precigen 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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