May 29, 2018

Opportunity Equity Update for Week Ended 5/25/18

Foot Locker Climbs on Earnings While Quotient Falls Below 50 and 200-day moving average

Last week, the Opportunity Equity strategy gained 1.03%, outperforming the S&P 500’s 0.33% rise (Exhibit 1). The strategy ended the week up 5.83% YTD, or 325 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 5/25/181

Time Period Opportunity Equity S&P 500
Last Week (5/18 -5/25) 1.03% 0.33%
MTD 7.28% 2.97%
QTD 8.51% 3.37%
YTD 5.83% 2.58%
Inception (annualized since 6/26/00) 7.34% 5.60%

Source: Bloomberg, Miller Value Partners

Foot Locker Inc. (FL) crossed above the 100-day moving average after announcing first quarter results. The company announced EPS of $1.45 above consensus of $1.25  on comps that were down -2.8% compared to expectations of down 3-4% while gross margins came in above management’s guidance (down -110bps vs. guidance of -150-175bps). The company reiterated guidance of positive comps for the back half of the year along with double-digit EPS growth for the year. Delta Air Lines Inc. (DAL) and United Continental Holdings (UAL) crossed above the 50 and 100 day moving average as oil prices fell over the week. The previous week United’s CFO, Andrew Levy, announced his resignation and will be temporarily replaced by Gerry Laderman as the company seeks a permanent replacement. There was minimal news on Inc. (AMZN) and RH (RH).

Exhibit 2: Significant Contributors to Performance, 5/18/18 – 5/25/18

Name Type Return
Foot Locker Inc. Equity 28.3%
Delta Air Lines Inc. Equity 5.5%
United Continental Holdings Equity 4.8% Inc. Equity 2.3%
RH Equity 2.5%

Source: Miller Value Partners

Quotient Technology Inc. (QUOT) fell below the 50 and 200-day moving average. Pandora Media Inc. (P) announced the exchange of roughly $193M of the $345M in outstanding convertible notes due December 2020. This exchange will extend their maturity by an additional 3 years and the notes will carry the same 1.75% coupon. There was minimal news on Flexion Therapeutics (FLXN), CenturyLink Inc. (CTL) and OneMain Holdings Inc. (OMF).

 Exhibit 3: Significant Detractors from Performance, 5/18/18 – 5/25/18

Name Type Return
Flexion Therapeutics Equity -6.1%
Quotient Technology Inc. Equity -5.0%
CenturyLink Inc. Equity -5.8%
OneMain Holdings Inc. Equity -2.7%
Pandora Media Inc. Equity -5.1%

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.

©2018 Miller Value Partners, LLC

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