April 22, 2019

Opportunity Equity Update for Week Ended 4/18/19

Qualcomm Gains on Settlement with Apple While Health Care Name Decline on Fears of ‘Medicare for All’

Last week, the Opportunity Equity strategy lost -0.79%, underperforming the S&P 500’s -0.07% decline (Exhibit 1). The strategy ended the week up 17.19% YTD, or 60 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 4/18/191

Time Period Opportunity Equity S&P 500
Last Week (4/12 – 4/18) -0.79% -0.07%
MTD 3.04% 2.59%
QTD 3.04% 2.59%
YTD 17.19% 16.59%
Inception (annualized since 6/26/00) 6.99% 5.80%

Source: Bloomberg, Miller Value Partners

Qualcomm Inc. (QCOM) crossed above the 200-day moving average after Apple and Qualcomm announced the settlement of their litigation and a new licensing and chipset supply agreement. QCOM noted that the deal will have a $2 positive impact on EPS. Lennar Corp. (LEN) was downgraded to neutral at Susquehanna with a price target of $57, upside of 8%. Brighthouse Financial Inc. (BHF) gained over the week as David Einhorn’s quarterly letter spoke to his investment thesis on Brighthouse and why he likes the name. Micron Technology Inc. (MU) crossed above the 200-day moving average as analysts turn optimistic on NAND prices with MKM coming out with a positive note on the 2H recovery. There was minimal news on Pulte Group Inc. (PHM).

Exhibit 2: Significant Contributors to Performance, 4/12/19 – 4/18/19

Name Type Return
Qualcomm Inc. Equity 40.3%
Pulte Group Inc. Equity 3.4%
Lennar Corp. Equity 3.8%
Brighthouse Financial Inc. Equity 3.0%
Micron Technology Inc. Equity 3.3%

Source: Miller Value Partners

Health-care stocks tumbled over the week as fears of ‘Medicare for All’ continued to increase. Mallinckrodt (MNK) fell below the 100-day moving average. The company announced an earlier timeline of top-line data readouts of StrataGraft by the end of 2019 with a biologic license application in 2020 assuming positive data. Bausch Health Companies Inc. (BHC) fell below the 50, 100, and 200-day moving average while Alexion Pharmaceuticals (ALXN) fell below the 50-day moving average. RH (RH) entered into a new credit agreement which allows for borrowing up to $200m at LIBOR plus 6.50% which analysts speculate might be used for share repurchases. There was minimal news on Avon Products Inc. (AVP).

Exhibit 3: Significant Detractors from Performance, 4/12/19 – 4/18/19

Name Type Return
Mallinckrodt Equity -16.1%
Bausch Health Companies Inc. Equity -6.6%
RH Equity -7.2%
Alexion Pharmaceuticals Equity -7.5%
Avon Products Inc. Equity -7.4%

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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