April 8, 2019

Opportunity Equity Update for Week Ended 4/5/19

Delta Gains on Preliminary Results While Stitch Fix Declines on Insider Selling

Last week, the Opportunity Equity strategy gained 4.88%, outperforming the S&P 500’s 2.09% gain (Exhibit 1). The strategy ended the week up 19.28% YTD, or 326 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 4/5/191

Time Period Opportunity Equity S&P 500
Last Week (3/29 – 4/5) 4.88% 2.09%
MTD 4.88% 2.09%
QTD 4.88% 2.09%
YTD 19.28% 16.02%
Inception (annualized since 6/26/00) 7.10% 5.78%

Source: Bloomberg, Miller Value Partners

Delta Air Lines Inc. (DAL) crossed above the 200-day moving average while United Continental Holdings (UAL) crossed above the 50 and 200-day moving average after Delta reported 1Q preliminary results. Delta now expects 1Q EPS of $0.85-$0.95 compared to consensus of $0.80 with revenue per available seat mile (RASM) up 2% compared to guidance of flat to up 2% with cost per available seat mile (CASM) flat to up 0.5% versus up 1-2% previously. The company also announced the extension of their American Express agreement. NXP Semiconductors (NXPI) crossed above the 50-day moving average while Mallinckrodt (MNK) crossed above the 50 and 100-day moving average and Discovery Inc. (DISCA) crossed above the 50, 100 and 200-day moving average. Discovery announced a deal to split assets of UKTV between the BBC and Discovery along with a short-term deal to license some BBC’s lifestyle content and a new 10 year content license agreement with the BBC to license their natural history productions.

Exhibit 2: Significant Contributors to Performance, 3/29/19 – 4/5/19

Name Type Return
Delta Air Lines Inc. Equity 11.8%
NXP Semiconductors Equity 11.0%
Mallinckrodt Equity 8.0%
Discovery Inc. Equity 9.1%
United Continental Holdings Equity 6.4%

Source: Miller Value Partners

Teva Pharmaceuticals (TEVA) received EU approval for Ajovy in the treatment for prophylaxis of migraine. Wells Fargo analyst David Maris lowered his forecasted 2019 EPS to $2.45 from $2.60 citing FX headwinds. Stitch Fix Inc. (SFIX) declined over the week as insiders sold shares with Scott Darling, Chief Legal Officer, selling 2k shares for $57k, Marka Hansen, a director, selling 6.5k shares for $185k and Steven Spurlock, a 10% owner, selling 131k shares for $3.7M. There was minimal news on Endurance International Group Holdings (EIGI).

Exhibit 3: Significant Detractors from Performance, 3/29/19 – 4/5/19

Name Type Return
Teva Pharmaceuticals Equity -2.8%
Endurance International Group Holdings Equity -3.2%
Stitch Fix Inc. Equity -2.7%
Cash Equity 0.0%
*Recently Added Security* Equity 0.9%

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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