August 20, 2018

Opportunity Equity Update for Week Ended 8/17/18

Mallinckrodt Rises as Analysts’ Price Targets Increase While Lennar Falls Below 50-day Moving Average

Last week, the Opportunity Equity strategy gained 0.77%, outperforming the S&P 500’s 0.66% gain (Exhibit 1). The strategy ended the week up 21.11% YTD, or 1319 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 8/17/181

Time Period Opportunity Equity S&P 500
Last Week (8/10 – 8/17) 0.77% 0.66%
MTD 4.88% 1.36%
QTD 8.92% 5.14%
YTD 21.11% 7.92%
Inception (annualized since 6/26/00) 8.04% 5.83%

Source: Bloomberg, Miller Value Partners

Mallinckrodt (MNK) rose over the week as multiple analysts raised their price targets. Mizuho raised its price target to $30 from $17, Canaccord to $34 from $22 and Suntrust to $32 from $21, which is in-line with where the stocked closed on Friday at $34.69. RH (RH) was up over the week after announcing Karen Boone’s resignation as CFO. Karen will be replaced by Ryno Blignaut effective August 14th who previously served as CFO of Xoom Corporation. Teva Pharmaceuticals (TEVA) crossed above the 50-day moving average. After multiple years of delay the FDA finally approved Teva’s generic EpiPen auto-injector with launched expected in 4Q18. Brighthouse Financial (BHF) was raised to neutral at Credit Suisse from Underperform with a price target of $35. There was minimal news on CenturyLink Inc. (CTL).

Exhibit 2: Significant Contributors to Performance, 8/10/18 – 8/17/18

Name Type Return
Mallinckrodt PLC Equity 11.5%
CenturyLink Inc. Equity 9.8%
RH Equity 4.5%
Teva Pharmaceuticals Equity 7.7%
Brighthouse Financial Equity 3.7%

Source: Miller Value Partners

Lennar Corp. (LEN) fell below the 50-day moving average. Intrexon Corp. (XON) fell below the 200-day moving average after announcing the delay of its financial filings. The company filed the financials a few days later with 2Q revenue coming in at $45.3M ($6M below consensus) and EPS of -$0.51 compared to expectations for -$0.30. Analysts were disappointed by collaboration and licensing revenues appearing to decline faster than expected. There was minimal news on the other top detractors (XON, FB, FLXN).

 Exhibit 3: Significant Detractors from Performance, 8/10/18 – 8/17/18

Name Type Return
Quotient Technology Inc. Equity -4.8%
Lennar Corp. Equity -5.3%
Intrexon Corp. Equity -4.6%
Facebook Inc. Equity -3.6%
Flexion Therapeutics Equity -4.5%

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.

©2018 Miller Value Partners, LLC

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