July 23, 2018

Opportunity Equity Update for Week Ended 7/20/18

United Climbed on 2Q Results While RH Fell on Fears of Tariffs

Last week, the Opportunity Equity strategy advanced 0.73%, outperforming the S&P 500’s 0.04% gain (Exhibit 1). The strategy ended the week up 17.44% YTD, or 1,154 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 7/20/181

Time Period Opportunity Equity S&P 500
Last Week (7/13 -7/20) 0.73% 0.04%
MTD 5.62% 3.17%
QTD 5.62% 3.17%
YTD 17.44% 5.90%
Inception (annualized since 6/26/00) 7.89% 5.74%

Source: Bloomberg, Miller Value Partners

United Continental Holdings (UAL) rose over the week after releasing 2nd quarter results which beat expectations and raised FY18 EPS guidance. The company reported EPS of $3.23 beating consensus of $3.07. Revenue per available seat mile (PRASM) was up 3% YoY and cost per available seat mile excluding fuel (CASMx) were down 30bps. The company guided for 3Q PRASM to be up 4-6% with CASMx being down 1% to flat and pretax margin guidance of 8-10%. The company updated full year guidance by brining capacity growth down to 4.5%-5% from 4.5-5.5% and increasing EPS by $0.25 to $7.25-$8.75. JPMorgan Chase & Co. (JPM/WS) Warrants rose over the week crossing above the 50, 100 and 200 day moving average. The company reported second quarter results with EPS of $2.29 beating consensus of $2.22. The beat was related to strong capital market results of $7.6B versus consensus of $6.6B along with stronger trading (up 13%) and core loan growth of 7% YoY. Provisions came in better than expected at $1.2B compared to consensus of $1.5B. Bank of America (BAC) crossed above the 50, 100 and 200-day moving average after announcing 2Q results which beat estimates. The company has EPS of $0.63 vs. consensus of $0.57. Net interest income (NII) increased 6% YoY while equities trading revenue increased 17%. Pulte Group Inc. (PHM) crossed above the 50, 100 and 200 day moving average despite June US housing starts dropping 12.3%, its biggest drop since November 2016. There was limited news on Quotient Technology Inc. (QUOT).

Exhibit 2: Significant Contributors to Performance, 7/13/18 – 7/20/18

Name Type Return
United Continental Holdings Equity 12.2%
JPMorgan Chase & Co. Equity 7.4%
Bank of America Equity 5.5%
Pulte Group Inc. Equity 4.9%
Quotient Technology Inc. Equity 3.9%

Source: Miller Value Partners

RH (RH) fell over the week as fear of tariffs continue to hit the stock. Bausch Health Companies Inc. (BHC) crossed below the 50-day moving average. Intrexon Corp. (XON) was downgraded to underperform from neutral at Bank of America citing lack of near-term catalysts. There was minimal news on CenturyLink Inc. (CTL) and Endurance International Group Holdings (EIGI).

 Exhibit 3: Significant Detractors from Performance, 7/13/18 – 7/20/18

Name Type Return
RH Equity -5.9%
Bausch Health Companies Inc. Equity -3.5%
CenturyLink Inc. Equity -5.6%
Intrexon Corp. Equity -4.1%
Endurance International Group Holdings Equity -3.7%

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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