July 2, 2018

Opportunity Equity Update for Week Ended 6/29/18

Wayfair Rises on Price Target Raise While RH Declines on Insider Selling

Last week, the Opportunity Equity strategy declined -3.13%, underperforming the S&P 500’s -1.31% fall (Exhibit 1). The strategy ended the week up 11.19% YTD, or 854 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 6/29/181

Time Period Opportunity Equity S&P 500
Last Week (6/22 -6/29) -3.13% -1.31%
MTD 6.11% 0.62%
QTD 14.01% 3.43%
YTD 11.19% 2.65%
Inception (annualized since 6/26/00) 7.59% 5.58%

Source: Bloomberg, Miller Value Partners

Wayfair Inc. (W) climbed over the week as Bank of America increased their price target to $125, upside of 5%, up from $95 previously. Lennar Corp. (LEN) gained over the week after announcing strong 2Q results. The company had GAAP EPS of $0.94 beating consensus of $0.43. Lennar had 12,095 closings beating guidance of 11,500 units with new orders coming in at 14,440 ahead of guidance of 13,800. The company increased FY18 guidance for gross margin and lowered its SG&A guidance ranges. The company raised its synergies to $160M in 2018 up from $125M previously and $380M in 2019 up from $365M.The company stated that it sees continued strong order demand. Teva Pharmaceuticals (TEVA) gained over the week as Citi added Teva to its US focus list. Citi raised its price target to $27, upside of 11%, up from $25 previously. Celgene Corp. (CELG) was up over the week after releasing Phase 3 data for Luspatercept which met both primary and key secondary endpoints in patients with MDS. Analysts model $1B in peak sales in this indication. The company plans to file regulatory applications in 1H19. There was minimal news on Endurance International Group Holdings (EIGI).

Exhibit 2: Significant Contributors to Performance, 6/22/18 – 6/29/18

Name Type Return
Endurance International Group Holdings Equity 4.2%
Wayfair Inc. Equity 3.3%
Lennar Corp. Equity 2.5%
Teva Pharmaceuticals Equity 1.4%
Celgene Corp. Equity 0.8%

Source: Miller Value Partners

RH (RH) fell over the week as insiders continued to sell including Karen Boone, CFO, via a 10b5-1. Intrexon Corporation (XON) was down over the week after the company announced the offering of $200M in convertible senior note due 2023 along with an offering of common stock equaling $100M. Randal Kirk, Chairman and Chief Executive Officer of Intrexon, bought the entire common stock offering of 7.5M shares for $100M equaling his credit line agreement from January. Fibrocell, which works with Intrexon in an Exclusive Channel Collaboration (ECC), recently presented updated safety and efficacy results for FCX007 in Recessive Dystrophic Epidermolysis Bullosa (RDEB). The company intends to start Phase 2 of the trial in six pediatric subjects this quarter. American Airlines Group Inc. (AAL) and Delta Air Lines Inc. (DAL) were down over the week on fears of the trade dispute becoming a trade war and impacting global networks. Valeant Pharmaceuticals International Inc. (VRX) declined over the week while Mizuho raised its price target for the company to $31, up from $27.

 Exhibit 3: Significant Detractors from Performance, 6/22/18 – 6/29/18

Name Type Return
RH Equity -7.7%
Intrexon Corp. Equity -10.1%
American Airlines Group Inc. Equity -8.2%
Delta Air Lines Inc. Equity -6.0%
Valeant Pharmaceuticals International Inc. Equity -4.2%

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.

©2018 Miller Value Partners, LLC

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