July 8, 2019

Opportunity Equity Update for Week Ended 7/5/19

RH Gains on Tariff Truce While Flexion Falls Below 50 and 100-day Moving Average

Last week, the Opportunity Equity strategy gained 1.67%, underperforming the S&P 500’s 1.69% rise (Exhibit 1). The strategy ended the week up 17.02% YTD, or 353 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 7/5/191

Time Period Opportunity Equity S&P 500
Last Week (6/28 – 7/5) 1.67% 1.69%
MTD 1.67% 1.69%
QTD 1.67% 1.69%
YTD 17.02% 20.55%
Inception (annualized since 6/26/00) 6.90% 5.92%

Source: Bloomberg, Miller Value Partners

RH (RH) crossed above the 100 and 200-day moving average during the week after Trump and Xi agreed to continue trade negotiations and to hold off on raising tariffs on an additional $300B of Chinese goods. Quotient Technology Inc. (QUOT) crossed above the 200-day moving average. Britain’s competition regulator announced that it is investigating Amazon.com Inc.’s (AMZN) $575M investment in food-delivery service Deliveroo. Delta Air Lines Inc. (DAL) gained over the week after issuing updated 2Q guidance. The company expects EPS of $2.25-2.35 up from the $2.05-2.35 previous guidance due to a higher revenue per available seat mile (RASM) growth now expected to come in at +3.5% at the high end of prior guidance (+1.5% to +3.5%) along with lower fuels costs of $2.07-2.12 down from $2.10-2.20 previously. The company also guided for $1.5B in free cash flow. The company will report earnings on July 11th. Avon Products Inc. (AVP) announced its cash tender offer for its outstanding 4.6% notes due 2020 resulting in $274.27M of the approximately $387M outstanding notes being tendered as of July 2nd early tender date.

Exhibit 2: Significant Contributors to Performance, 6/28/19 – 7/5/19

Name Type Return
RH Equity 6.0%
Quotient Technology Inc. Equity 7.4%
Amazon.com Inc Equity 2.6%
Delta Air Lines Inc Equity 3.4%
Avon Products Inc Equity 4.1%

Source: Miller Value Partners

Flexion Therapeutics (FLXN) fell below the 50 and 100-day moving average. RBC lowered its price target for Stitch Fix Inc. (SFIX) to $43 from $52, implying an upside of 39%. Needham & Co. initiated on the name with a hold rating. There was minimal news on Mallinckrodt plc (MNK), GTY Technology Holdings Inc. (GTYH) and NXP Semiconductors (NXPI).

Exhibit 3: Significant Detractors from Performance, 6/28/19 – 7/5/19

Name Type Return
Flexion Therapeutics Equity -9.6%
Mallinckrodt plc Equity -5.9%
Stitch Fix, Inc. Equity -3.1%
GTY Govtech Inc. Equity -5.0%
NXP Semiconductors NV Equity -1.1%

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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