The Intellectual Investor: Opportunity Equity Weekly Updates

February 21, 2017

LMM Opportunity Equity Update for Week Ended 2/17/17

OneMain Holdings moves up after earnings announcement, While Pangaea moves down

Last week, the Opportunity Equity Strategy gained 4.43%, outperforming the S&P 500’s 1.60% rise (Exhibit 1). The strategy ended the week up 10.96% YTD, or 564 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of LMM Opportunity Equity Strategy Versus Equity Indices, Through 2/17/171

Time Period Opportunity Equity S&P 500
Last Week (2/10 – 2/17) 4.43% 1.60%
MTD 10.85% 3.36%
QTD 10.96% 5.32%
YTD 10.96% 5.32%
Inception (annualized since 12/30/99) 6.64% 4.81%

Source: Bloomberg, LMM

OneMain Holdings Inc. (OMF) was a top contributor for the week after releasing fourth quarter results. OMF had an adjusted EPS miss by $0.01 with lower loan growth offset by lower provisions but provided an improved credit outlook for 2017 and 2018. The company was upgraded to buy at Compass Point and Wedbush with price targets of $31 and $35, respectively, pushing the stock above the 200-day moving average. Rumors swirled around Apple Inc. (AAPL) including a 3D laser scanner in the new iPhone. Endurance International Group Inc. (EIGI) announced solid fourth quarter results and provided in-line 2017 guidance. EIGI’s revenue of $292M beat consensus of $278M along with EBITDA of $87M versus consensus of $74.4M. Following the earnings announcement EIGI formed a bullish golden-cross, with the 50-day moving average closing above the 200-day moving average. There was minimal news on the other top contributors.

Exhibit 2: Significant Contributors to Performance, 2/10/17 – 2/17/17

Name Type Return
OneMain Holdings Inc. Equity 16.4%
Apple Inc. C100 1/18 Derivative 9.4%
Endurance International Group Holdings Equity 15.2%
Genworth Financial Inc. Equity 16.0%
Intrexon Corp. Equity 7.2%

Source: LMM LLC.

Pangaea One L.P. declined over the week after decreasing the fair value of one of its private holdings. There was minimal news on the other top detractors.

Exhibit 3: Significant Detractors from Performance, 2/10/17 – 2/17/17

Name Type Return
MGIC Investment Corp. Equity -4.3%
Quotient Technology Inc. Equity -2.7%
Pangaea One L.P. Private  -8.2%
Waifair Inc. Equity  -6.2%
Nationstar Mortgage Holdings Equity  -4.2%

Source: LMM LLC.

1The performance figures reflect the deduction of a model investment management fee of 1% (the highest fee for separate accounts under our fee schedule) 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 LMM.

Any views expressed are subject to change at any time, and LMM 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.

©2017 LMM LLC. LMM LLC is owned by Bill Miller and Legg Mason, Inc.

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