The Intellectual Investor: Income Strategy Weekly Updates

December 4, 2017

Income Strategy Update for Week Ended 12/1/17

National CineMedia Advances on Peer M&A Talk While Oaktree Specialty Lending Falls on Weak Earnings Report

Last week, the Income Strategy gained 0.12%, underperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.14% rise and the S&P 500’s 1.60% advance (Exhibit 1). The strategy ended the week up 12.98% YTD, or 579 basis points ahead of the high yield index and 727 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 12/1/171

Time Period Income Strategy ML HY II S&P 500
Last Week (11/24 – 12/1) 0.12% 0.14% 1.60%
MTD -0.24% 0.01% -0.20%
QTD -1.75% 0.15% 5.26%
YTD 12.98% 7.19% 20.25%
Inception (annualized since 4/2/2009) 15.05% 12.26% 16.55%

Source: Bloomberg, Miller Value Partners

Five equities comprised last week’s top five contributors (Exhibit 2). Abercrombie & Fitch (ANF) rose with the retail sector on reports of a strong Cyber Monday. Apollo Global Management (APO) moved above its 50-day moving average. National CineMedia (NCMI) rose in conjunction with reports that Cineworld Group (CINE) and Regal Entertainment (RGC) were in M&A discussions. There was no price-changing news on Maiden Holdings (MHLD).

Exhibit 2: Significant Contributors to Performance, 11/24/17 – 12/1/17

Name Type Return
Abercrombie & Fitch Co Equity 5.0%
Apollo Global Management LLC Equity 2.2%
National CineMedia Equity 4.8%
Maiden Holdings Ltd Equity 3.1%
*Recently Added Security* Equity 4.5%

Source: Miller Value Partners

Four equities and a bond comprised last week’s top five detractors (Exhibit 3). Oaktree Specialty Lending Corp (OCSL), formerly known as “Fifth Street Finance,” fell after reporting Q4 net investment income of $0.08, missing analyst estimates of $0.13. The company reported a decrease of -14% in book value to $6.16 (0.78x P/B) on credit challenges, though there was some noise in the quarter with the new management team working on stabilizing the portfolio. Chimera Investment Corp (CIM) fell below its 100-day moving average. There was no price-changing news on Carlyle Group (CG) or Greenhill & Co (GHL).

Exhibit 3: Significant Detractors from Performance, 11/24/17 – 12/1/17

Name Type Return
Carlyle Group LP Equity -4.8%
Oaktree Specialty Lending Corp Equity -8.4%
*Recently Added Security* Bond -2.3%
Chimera Investment Corp Equity -1.0%
Greenhill & Co Equity -1.0%

Source: Miller Value Partners

Did you know that we write this piece for Opportunity Equity as well? Check it out.

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 Income Strategy performance, please click on the Income Strategy 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.

©2017 Miller Value Partners, LLC

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