April 15, 2019

Opportunity Equity Update for Week Ended 4/12/19

JPMorgan Chase & Co. Rises on 1Q Earnings While Flexion Falls on CCO Departure

Last week, the Opportunity Equity strategy lost -0.97%, underperforming the S&P 500’s 0.56% gain (Exhibit 1). The strategy ended the week up 18.13% YTD, or 146 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 4/12/191

Time Period Opportunity Equity S&P 500
Last Week (4/5 – 4/12) -0.97% 0.56%
MTD 3.86% 2.66%
QTD 3.86% 2.66%
YTD 18.13% 16.67%
Inception (annualized since 6/26/00) 7.04% 5.81%

Source: Bloomberg, Miller Value Partners

JPMorgan Chase & Co. (JPM) crossed above the 200-day moving average after releasing 1Q results with Bank of America Corp. (BAC) moving up in sympathy. JPMorgan reported 1Q19 EPS of $2.65 ahead of consensus of $2.35 with revenues of $29.1B ahead of expectations of $28.2B with the company seeing better net interest income, higher investment banking fees and lower than expected costs. The company maintained their 2019 net interest income target of $3B increase from 2018. Brighthouse Financial Inc. (BHF) crossed above the 50 and 200-day moving average. NXP Semiconductors (NXPI) gained over the week as Piper Jaffray analyst was positive on the name stating that it would disproportionately benefit from a China trade resolution. The analyst raised his price target to $110 from $100, upside of 10%. There was minimal news on RH (RH).

Exhibit 2: Significant Contributors to Performance, 4/5/19 – 4/12/19

Name Type Return
RH Equity 10.5%
JPMorgan Chase & Co. Equity 5.6%
Brighthouse Financial Inc. Equity 5.7%
Bank of America Corp. Equity 3.8%
NXP Semiconductors Equity 2.2%

Source: Miller Value Partners

Flexion Therapeutics (FLXN) declined after the CEO announced that Commercial Head Dan Deardorf is leaving and the company had initiated a search for a new Chief Commercial Officer (CCO). The company is looking for someone with broader commercial experience at this phase of Zilretta’s launch. The company reiterated revenue guidance of $65-80m. Endo International PLC (ENDP), Mallinckrodt PLC (MNK) and Teva Pharmaceuticals (TEVA) declined over the week as worries around the pending opioid cases continued to weigh on the stocks. The FDA posted tentative approval of Teva’s Icatibant, a treatment for acute hereditary angioedema attacks. DA Davidson reiterated their buy rating on Quotient Technology Inc. (QUOT) with a price target of $20, upside of 116%, after a review of Albertsons Performance Media’s, powered by Quotient, performance after its first year. The review shows that Albertsons is delivering to CPGs as high as two times more return on their ad spend compared to industry benchmarks set by Nielsen.

Exhibit 3: Significant Detractors from Performance, 4/5/19 – 4/12/19

Name Type Return
Flexion Therapeutics Equity -16.5%
Endo International PLC Equity -8.1%
Mallinckrodt PLC Equity -7.4%
Quotient Technology Inc. Equity -6.5%
Teva Pharmaceuticals Equity -5.6%

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.

©2019 Miller Value Partners, LLC

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