September 24, 2018

Opportunity Equity Update for Week Ended 9/21/18

Bausch Health Gains on Upgrade While Stitchfix Declines on Release of Amazon’s New Service, Scout

Last week, the Opportunity Equity strategy gained 1.19%, outperforming the S&P 500’s 0.86% gain (Exhibit 1). The strategy ended the week up 24.62% YTD, or 1349 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 9/21/181

Time Period Opportunity Equity S&P 500
Last Week (9/14 – 9/21) 1.19% 0.86%
MTD -1.22% 1.08%
QTD 12.08% 8.26%
YTD 24.62% 11.13%
Inception (annualized since 6/26/00) 8.17% 5.97%

Source: Bloomberg, Miller Value Partners

Bausch Health Companies Inc. (BHC) crossed above the 50 and 100-day moving average as Barclays initiated on the name with an overweight rating and a price target of $29, 16% upside. In addition, the CEO, Joseph Papa, and CFO, Paul Herendeen, both purchased stock on September 14th. Brighthouse Financial Inc. (BHF) crossed above the 100-day moving average while ADT Inc. (ADT) crossed above the 50-day moving average as the company announced a new strategic initiative with Amazon. The new initiative integrates Amazon’s new Alexa Guard feature with ADT Pulse and offers ADT’s professional installation and monitoring solutions through the Alexa Guard website and Amazon mobile app. American Airlines Group Inc. (AAL) crossed above the 100-day moving average. The company announced it was increasing its US domestic baggage fee by $5 in line with United Airlines’ announcement earlier in the week. Teva Pharmaceuticals (TEVA) crossed above the 50-day moving average as it received approval for its drug Ajovy, for the prevention of migraines in adults. Teva’s Ajovy is now the second anti-CGRP to gain approval behind Amgen/Novartis’s Aimovig which received approval in May.

Exhibit 2: Significant Contributors to Performance, 9/14/18 – 9/21/18

Name Type Return
Bausch Health Companies Inc. Equity 11.5%
Brighthouse Financial Inc. Equity 10.7%
ADT Inc. Equity 9.9%
American Airlines Group Inc. Equity 9.7%
Teva Pharmaceutical Equity 6.6%

Source: Miller Value Partners

Stitch Fix Inc. (SFIX) declined over the week following Amazon’s launch of a new shopping service that recommends items based on consumers’ preferences. The new service is called Scout. The stock was downgraded to neutral at Piper Jaffray with a price target of $43, 7% upside. Inc. (AMZN) hosted a device event where they released a plethora of new devices as well as new capabilities and use cases for Alexa. At this event the company also announced their strategic initiative with ADT. It was also reported that AMZN is considering opening as many as 3,000 Amazon Go stores over the next few years with ~50 slated for 2019. In addition, Amazon launched a local eCommerce site in Turkey. Genworth Financial Inc. (GNW) was down over the week as tension with China increased. Genworth along with China Oceanwide announced that they had submitted supplemental information to the regulators who are reviewing their merger. The merger agreement had previously been extended to December 1, 2018 to provide additional time for regulatory review. There was minimal news on Flexion Therapeutics (FLXN) and Quotient Technology Inc. (QUOT).

Exhibit 3: Significant Detractors from Performance, 9/14/18 – 9/21/18

Name Type Return
Stitch Fix Inc. Equity -18.0%
Flexion Therapeutics Equity -11.0% Inc. Equity -2.8%
Quotient Technology Inc. Equity -5.1%
Genworth Financial Inc. Equity -4.1%

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. 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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