April 29, 2019

Opportunity Equity Update for Week Ended 4/26/19

Facebook Up on Strong Q1 Results While American Declines on Lower Full Year Guidance

Last week, the Opportunity Equity strategy gained 2.80%, outperforming the S&P 500’s 1.21% rise (Exhibit 1). The strategy ended the week up 20.48% YTD, or 248 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 4/26/191

Time Period Opportunity Equity S&P 500
Last Week (4/19 – 4/26) 2.80% 1.21%
MTD 5.93% 3.83%
QTD 5.93% 3.83%
YTD 20.48% 18.00%
Inception (annualized since 6/26/00) 7.13% 5.86%

Source: Bloomberg, Miller Value Partners

Avon Products Inc. (AVP) crossed above the 50-day moving average during the week. It was announced that Cerberus decided to sell its 80% stake in Avon North America. This reignited rumors of a possible sale of Avon Products to Natura which was previously reported in the Wall Street Journal. Facebook Inc. (FB) gained over the week after announcing strong first quarter results with ad revenue growing 31% leading to total revenue of $15.1B ahead of consensus of $15.0B with adjusted EPS of $2.28 head of consensus of $1.93. Daily Active Users came in at 2.1B for total FB family. The company lowered full year expense guidance growth to 37%-45% YoY from the 40-50% previously given and lowered CAPEX guidance to $17-19B from $18-20B. Amazon.com Inc. (AMZN) rose after reporting 1Q results. The company reported revenues of $59.7B in-line with the Street at $59.7B with a gross margin of 43.2% beating the Street at 41.9% helping operating income to come in at $4.42B ahead of consensus of $3.12B leading to EPS of $7.09 vs. $4.70. The company provided 2Q guidance of revenue $59.5-63.5B vs. Street at $62.4B and operating income of $2.6-3.6B vs. $4.19B from the Street. The company will be investing in Prime One-Day Shipping. There was minimal news for Ziopharm Oncology Inc. (ZIOP).

Exhibit 2: Significant Contributors to Performance, 4/19/19 – 4/26/19

Name Type Return
Avon Products Inc. Equity 20.8%
Facebook Inc. Equity 7.4%
Amazon.com Inc. Equity 4.8%
*New Security* Equity 9.5%
Ziopharm Oncology Inc. Equity 11.3%

Source: Miller Value Partners

American Airlines Group Inc. (AAL) crossed below the 50 and 100-day moving average after announcing 1Q results with adjusted EPS of $0.52 compared to consensus of $0.51 with total revenue of $10.58B vs consensus of $10.59B. The company expects full year capacity growth of 2.5% down from prior guidance of 2.75-3% due to the grounding of the 737 MAX planes. The company lowered full year EPS guidance to $4-6 from $5.50-7.50 due to a ~$0.60 drag from the 787 MAX groundings and a ~$1.25 drag from higher fuel prices. The company expects 2Q revenue per available seat mile to be up 1-3% vs. consensus of 2% and pre-tax margin guidance implies EPS of $1.45-1.85 below consensus of $1.94. Micron Technology Inc. (MU) declined in sympathy with Intel (INTC) which declined after reporting quarterly results and slashing full year guidance citing continued pricing weakness in NAND putting into questions the 2H recovery analysts are expecting. Baidu Inc. (BIDU) crossed below the 50 and 100-day moving average. There was minimal news on ADT Inc. (ADT), and CenturyLink (CTL).

Exhibit 3: Significant Detractors from Performance, 4/19/19 – 4/26/19

Name Type Return
ADT Inc. Equity -3.2%
American Airlines Group Inc. Equity -3.8%
Micron Technology Inc. Equity -3.0%
CenturyLink Inc. Equity -4.2%
Baidu Inc. Equity -2.9%

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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