July 29, 2019

Opportunity Equity Update for Week Ended 7/26/19

Ziopharm Rises with New CFO While Flexion Falls on Price Target Decline

Last week, the Opportunity Equity strategy gained 1.67%, outperforming the S&P 500’s 1.66% rise (Exhibit 1). The strategy ended the week up 16.94% YTD, or 512 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 7/26/191

Time Period Opportunity Equity S&P 500
Last Week (7/19 – 7/26) 1.67% 1.66%
MTD 1.59% 2.97%
QTD 1.59% 2.97%
YTD 16.94% 22.06%
Inception (annualized since 6/26/00) 6.87% 5.97%

Source: Bloomberg, Miller Value Partners

Ziopharm Oncology Inc. (ZIOP) named Sath Shukla as Chief Financial Officer. Genworth Financial Inc. (GNW) gained over the week after announcing a solicitation of consents from the holders of its outstanding notes. Genworth is considering the sale of Genworth Canada in order to increase the likelihood of subsequently completing the acquisition of Genworth by China Oceanwide. Bank of America Corp. (BAC) was raised to an outperform rating at KBW with a price target of $36, 17% upside. There was minimal news on RH (RH) and OneMain Holding Inc. (OMF).

Exhibit 2: Significant Contributors to Performance, 7/19/19 – 7/26/19

Name Type Return
Ziopharm Oncology Inc. Equity 13.0%
Genworth Financial Inc. Equity 7.7%
RH Equity 4.8%
OneMain Holding Inc. Equity 4.3%
Bank of America Corp. Equity 4.7%

Source: Miller Value Partners

Flexion Therapeutics (FLXN) declined over the week as RBC maintained their outperform rating on the name but lowered the price target to $20 from $31, 100% upside, after recalibrating their long-term outlook. American Airlines Group Inc. (AAL) fell below the 50 and 100-day moving average after reporting 2Q19 results. The company reported 2Q adjusted EPS of $1.82 ahead of consensus of $1.79 with total unit revenue growth of 3.5%. The company raised full year EPS guidance to $4.50-6.00 (vs. prior $4-6) which includes an additional $50M headwind from the MAX grounding. The company plans to grow its 3Q19 capacity by ~1.5% down from prior guidance of 2.2% as a result of the MAX grounding. Alexion Pharmaceuticals (ALXN) declined over the week after reporting 2Q results. The company reported a top-line beat with revenue of $1,203M vs street at $1,174M and EPS of $2.64 ahead of consensus of $2.34. The company raised full year guidance with revenue of $4,750-4,800M from $4,675-4,750m and EPS of $9.65-9.85 from $9.25-9.45. Pulte Group Inc. (PHM) crossed below the 50-day moving average after reporting 2Q results. The company reported revenues of $2,489M ahead of consensus of $2,465M with closings falling 3% YoY to 5,589 with the average selling price increasing to 1% YoY to $430k. Net new orders increased 7% YoY to 6,792 units beating consensus of 0% with EPS of $0.86 ahead of consensus of $0.82. The company expects full year deliveries of 22,300-22,800 with homebuilding gross margins of 23-23.3%, ASP of $425-430k and SG&A leverage guidance of 10.8-11.3%. There was minimal news on Endo International plc (ENDP).

Exhibit 3: Significant Detractors from Performance, 7/19/19 – 7/26/19

Name Type Return
Flexion Therapeutics Equity -7.9%
American Airlines Group Inc. Equity -5.6%
Alexion Pharmaceuticals Equity -5.1%
Pulte Group Inc. Equity -4.1%
Endo International plc Equity -7.0%

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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