The Intellectual Investor: Income Strategy Weekly Updates

October 16, 2017

Income Strategy Update for Week Ended 10/13/17

Washington Prime Group Moves Above Closely Watched Technical Levels While Community Health Falls on Trump Order

Last week, the Income Strategy declined -0.23%, underperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.02% rise and the S&P 500’s 0.17% advance (Exhibit 1). The strategy ended the week up 16.21% YTD, or 899 basis points ahead of the high yield index and 35 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 10/13/171

Time Period Income Strategy ML HY II S&P 500
Last Week (10/6 – 10/13) -0.23% 0.02% 0.17%
MTD 1.05% 0.17% 1.42%
QTD 1.05% 0.17% 1.42%
YTD 16.21% 7.22% 15.86%
Inception (annualized since 4/2/2009) 15.69% 12.47% 16.32%

Source: Bloomberg, Miller Value Partners

Four equities and a preferred comprised last week’s top five contributors (Exhibit 2). Mall REIT Washington Prime Group (WPG) moved above closely watched technical levels. Securities of shipping operator Seaspan (SSW) rose after the company maintained their $0.125/share dividend (6.6% annualized yield). There was no price-changing news on Apollo Global Management (APO) or Chimera Investment Corp (CIM).

Exhibit 2: Significant Contributors to Performance, 10/6/17 – 10/13/17

Name Type Return
Washington Prime Group Equity 5.2%
Seaspan Corp Equity 4.8%
Apollo Global Management Equity 2.2%
Seaspan Corp 7.875% Preferred 3.1%
Chimera Investment Corp Equity 1.1%

Source: Miller Value Partners

Four equities and a bond comprised last week’s top five detractors (Exhibit 3). National CineMedia (NCMI) declined as movie theatre stocks fell after a worse than expected box office outlook. Debt of Community Health Systems (CYH) fell after President Trump announced his administration is ending cost-sharing reduction subsidies to health insurers. Mizuho published a note stating 4Q17 and 2018 estimates for hospital operators are likely now too high and that a re-rate to the downside should be expected. There was no price-changing news on Abercrombie & Fitch (ANF), Maiden Holdings (MHLD), or Medley Capital (MCC).

Exhibit 3: Significant Detractors from Performance, 10/6/17 – 10/13/17

Name Type Return
Abercrombie & Fitch Co Equity -9.4%
National CineMedia Equity -5.0%
Maiden Holdings Ltd Equity -3.4%
Community Health Systems 6.875% 2/22 Bond -4.2%
Medley Capital Corp Equity -3.8%

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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