July 15, 2019

Opportunity Equity Update for Week Ended 7/12/19

MU Gains on Japan’s New Restrictions While BHC and ALXN Fall Below the 50, 100 and 200-day Moving Average

Last week, the Opportunity Equity strategy gained 0.36%, underperforming the S&P 500’s 0.82% rise (Exhibit 1). The strategy ended the week up 17.45% YTD, or 409 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 7/12/191

Time Period Opportunity Equity S&P 500
Last Week (7/5 – 7/12) 0.36% 0.82%
MTD 2.04% 2.53%
QTD 2.04% 2.53%
YTD 17.45% 21.54%
Inception (annualized since 6/26/00) 6.91% 5.95%

Source: Bloomberg, Miller Value Partners

Micron Technology Inc. (MU) gained over the week as Japan’s Prime Minister imposed new restrictions on exports that will likely impact Samsung to the benefit of Micron and Western Digital. If the ban continues, memory prices are expected to increase as analysts estimate that 75% of DRAM and 45% of NAND global output is at risk. Amazon.com Inc. (AMZN) gained over the week in anticipation of their fifth annual Prime Day on 7/15 which will run for 48hrs this year versus 36hrs in 2018. Facebook Inc. (FB) gained over the week as Barclays published a positive note on the company stating that it had gotten too cheap to ignore and recommending buying into the print. The WSJ reported that the Federal Trade Commission (FTC) approved a ~$5B settlement with FB following its investigation into FB’s privacy practices post the Cambridge Analytica scandal. Delta Air Lines Inc. (DAL) rose after reported second quarter results which beat expectations. The company reported adjusted EPS of $2.35 ahead of consensus of $2.28 driven by total revenue per available seat mile (TRASM) growth of 3.8% compared to guidance of 3.5% provided in early July. The company provided 3Q guidance with EPS of $2.10-2.40 versus consensus of $1.95-2.47 and TRASM of 1.5-3.5%. The company raised its 2019 earnings target to $6.75-7.25 from $6.00-7.00 along with a 15% dividend increase and increased full year revenue growth to 6-7% up from 5-7% previously. There was minimal company specific news on Pulte Group Inc. (PHM).

Exhibit 2: Significant Contributors to Performance, 7/5/19 – 7/12/19

Name Type Return
Micron Technology Inc. Equity 12.9%
Amazon.com Inc. Equity 3.5%
Facebook Inc. Equity 4.3%
Delta Air Lines Inc. Equity 5.0%
Pulte Group Inc. Equity 5.1%

Source: Miller Value Partners

Bausch Health Companies Inc. (BHC) and Alexion Pharmaceuticals (ALXN) fell below the 50, 100-day and 200-day moving average. Stitch Fix Inc. (SFIX) was raised to a buy at Goldman Sachs with a price target of $38, 37% upside. Endo International plc (ENDP) declined over the week as RBC lowered the stock to a sector perform rating with a price target of $6, 46% upside, citing opioid uncertainty and excessive leverage. There was minimal news on Avon Products Inc. (AVP).

Exhibit 3: Significant Detractors from Performance, 7/5/19 – 7/12/19

Name Type Return
Bausch Health Companies Inc. Equity -6.6%
Alexion Pharmaceuticals Equity -7.3%
Stitch Fix Inc. Equity -10.8%
Avon Products Inc. Equity -3.7%
Endo International plc 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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