May 13, 2019

Opportunity Equity Update for Week Ended 5/10/19

Avon Gains on Rumors of Natura Take Over While Semiconductors Decline on US, China Trade War

Last week, the Opportunity Equity strategy lost 2.88%, underperforming the S&P 500’s -2.10% decline (Exhibit 1). The strategy ended the week up 18.05% YTD, or 228 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 5/10/191

Time Period Opportunity Equity S&P 500
Last Week (5/3 – 5/10) -2.88% -2.10%
MTD -1.81% -2.09%
QTD 3.79% 1.87%
YTD 18.05% 15.77%
Inception (annualized since 6/26/00) 7.00% 5.74%

Source: Bloomberg, Miller Value Partners

Avon Products Inc. (AVP) rose above the 50-day moving average after Intereconomia.com reported that Santander’s board approved a loan of $2.1B for Natura’s potential purchase of Avon. Natura later denied the report. Bausch Health Companies Inc. (BHC) crossed above the 50, 100 and 200-day moving average after reporting a 1Q beat and raising full year guidance. The company reported revenues of $2.02B vs consensus of $2.03B and adjusted EBITDA of $851M ahead of consensus of $816M. The company raised full year 2018 revenue guidance to $8.35-8.55B up from $8.30-8.50B and adjusted EBITDA of $3.40-3.55B from $3.35-3.50B. Flexion Therapeutics (FLXN) crossed above the 50-day moving average reporting results that showed sales acceleration in April. The company reported revenue of $10.6M slightly below consensus of $11M with EPS of -$1.09 vs consensus of -$1.08. Management noted on the call that preliminary April Zilretta sales came in at $5.1m with expectations for this to increase monthly over the balance of the year. The company reiterated full year guidance of $65-80M in revenues. Quotient Technology Inc. (QUOT) crossed above the 50 and 100-day moving average after reporting first quarter results with revenues of $98.1M ahead of the Street at $96.1M and EBITDA of $8.4M ahead of the Street at $7.3M. The company reiterated full year guidance and guided for 2Q revenue of $102-106M and adjusted EBITDA of $11-14M. The Board of Directors authorized a new $60M buyback program earlier in the month. GTY Technology Inc. (GTYH) crossed above the 100 and 200-day moving average.

Exhibit 2: Significant Contributors to Performance, 5/3/19 – 5/10/19

Name Type Return
Avon Product Inc. Equity 12.2%
Bausch Health Companies Inc. Equity 8.0%
Flexion Therapeutics Equity 16.6%
Quotient Technology Inc. Equity 7.0%
GTY Technology Inc. Equity 7.7%

Source: Miller Value Partners

Micron Technology (MU) crossed below the 50, 100 and 200-day moving average while NXP Semiconductors (NXPI) declined as the US, China trade war escalated with Trump implementing new tariffs on Friday with China reciprocating on Monday. ADT Inc. (ADT) crossed below the 50-day moving average after reporting first quarter results. The company reported revenue of $1.24B ahead of consensus of $1.22B with adjusted EBITDA of $621m vs Street at $610M. Gross attrition declined 30bps to 13.3% and the company reaffirmed full year guidance. Brighthouse Financial Inc. (BHF) crossed below the 200-day moving average. The company reported 1Q EPS of $2.21 ahead of consensus of $2.08. The annuities business performed better than expected but both Life and Run-off segments missed due to higher claims related to lower reinsurance recoveries and lower net investment income. The company repurchased $52M of shares in the quarter and they issued a new $400M share repurchase authorization.

Exhibit 3: Significant Detractors from Performance, 5/3/19 – 5/10/19

Name Type Return
*New Security* Equity -13.8%
Micron Technology Equity -10.1%
NXP Semiconductors Equity -7.3%
ADT Inc. Equity -7.1%
Brighthouse Financial Inc. Equity -6.8%

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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