June 11, 2018

Opportunity Equity Update for Week Ended 6/8/18

Valeant is Upgraded While Ziopharm Falls Below 200 and 50-day Moving Average

Last week, the Opportunity Equity strategy gained 5.22%, outperforming the S&P 500’s 1.66% rise (Exhibit 1). The strategy ended the week up 11.19% YTD, or 634 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 6/8/181

Time Period Opportunity Equity S&P 500
Last Week (6/1 -6/8) 5.22% 1.66%
MTD 6.11% 2.77%
QTD 14.01% 5.65%
YTD 11.19% 4.85%
Inception (annualized since 6/26/00) 7.62% 5.72%

Source: Bloomberg, Miller Value Partners

Valeant Pharmaceuticals International Inc. (VRX) gained over the week. Barclays upgraded Valeant to an overweight rating with a $29 price target, upside of 12%, based on the view that the business has hit an inflection point with its existing business stabilizing. RH (RH) rose over the week as it heads into its earnings announcement this evening. Endo Pharmaceuticals Holdings Inc. (ENDP) crossed above the 100 and 200-day moving average. Stitch Fix Inc. (SFIX) crossed above the 50 and 100-day moving average after announcing third quarter results. The company announced 3Q revenue of $317M vs. consensus of $306M and ahead of management’s previous guidance of $300-310M, driven by active clients of 2.7M (up 30% YoY) and average revenue per client up 2.5% YoY with both gross margins and EBITDA margins coming in better than expected. The company guided for 4Q revenue to be up 20-24% while guiding for EBITDA margins of 2.5% (at the midpoint) as a result of operating expenses being pushed into the fourth quarter. The company also announced the launch of Stitch Fix Kids for children 2-14 years of age. There was minimal news on Mallinckrodt (MNK).

Exhibit 2: Significant Contributors to Performance, 6/1/18 – 6/8/18

Name Type Return
Valeant Pharmaceuticals International Inc. Equity 16.8%
RH Equity 15.2%
Endo Pharmaceuticals Holdings Inc. Equity 21.8%
Stitch Fix Inc. Equity 31.1%
Mallinckrodt plc Equity 13.2%

Source: Miller Value Partners

Ziopharm Oncology Inc. (ZIOP) fell below the 200 and 50-day moving average. The company presented at the 2018 American Society of Clinical Oncology (ASCO) and showed their controlled IL-12 platform as a monotherapy achieved anti-tumor response in patients with refractory glioblastoma (rGBM) and metastatic breast cancer (mBC). Facebook Inc. (FB) was down over the week on more negative news including a glitch that impacted 14M users’ private posts and the confirmation of data sharing partnerships with at least four Chinese companies including Huawei, the world’s third largest smartphone maker. American Airlines Group Inc. (AAL) was down after LUV and DAL lowered guidance. Platform Specialty Product Corp. (PAH) fell over the week after a story in the Wall Street Journal reported that PAH was in talks to sell its Ag business to London Wilmcote for approximately $3-4B including debt. There was minimal news on GTY Technology Holding Inc. (GTYHU).

 Exhibit 3: Significant Detractors from Performance, 6/1/18 – 6/8/18

Name Type Return
Ziopharm Oncology Inc. Equity -12.7%
Facebook Inc. Equity -2.5%
American Airlines Group Inc. Equity -2.0%
GTY Technology Holding Inc. Equity -5.9%
Platform Specialty Product Corp. Equity -2.2%

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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