Income Strategy Weekly Updates

August 16, 2022

Income Strategy Update for Week Ended 8/12/22

Viatris Gains on Earnings Beat, While Detractors See Light News

Last week, the Income Strategy rose 5.05%, outperforming the ICE BofA Merrill Lynch High Yield Master II Index’s 0.94% gain and outperforming the S&P 500’s 3.31% gain. (Exhibit 1). The strategy ended the week down -18.10% YTD, or 1,059 basis points behind the high yield index and 876 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 8/12/221

Time Period Income Strategy ML HY II S&P 500
Last Week (8/5 – 8/12) 5.05% 0.94% 3.31%
MTD 6.28% 1.47% 3.71%
QTD 10.30% 7.59% 13.27%
YTD -18.10% -7.51% -9.34%
Inception (annualized since 4/2/2009) 11.06% 9.09% 15.67%

Source: Bloomberg, Miller Value Partners

Five equities comprised last week’s top 5 contributors. Viatris (VTRS) rose last week after reporting 2Q22 revenue of $4.12 billion, -3% Y/Y on an operational basis, below consensus of $4.19 billion, and diluted EPS of $0.26, compared to a net loss per share of -$0.23 in 2Q21, ahead of analyst expectations for EPS of $0.19. The company generated 2Q22 free cash flow of $718.6 million, bringing TTM FCF to $3,082.9 million, or a FCF yield of ~22.9%. The company lowered FY22 revenue guidance to $16.2-16.7 billion, compared to prior guidance for revenue of $17-17.5 billion due to foreign exchange headwinds, while reaffirming guidance for FY22 Adjusted EBITDA of $5.8-6.2 billion (36.5% margin at midpoint) and FCF of $2.5-2.9 billion. Jackson Financial (JXN) gained last week after reporting 2Q22 revenue of $6.52 billion and adjusted operating EPS of $2.52, compared to 2Q21 EPS of $6.74, ahead of analyst expectations for EPS of $1.91. The company returned $116 million to shareholders in the quarter, which brings YTD total capital returned to shareholders to $308 million, in line with the company’s full-year capital return target of $425-525 million, or ~16.8% of the company’s market cap at the midpoint. Additionally, the company demonstrated strong risk management in a very challenging market environment, as operating risk-based capital (RBC) ratios increased sequentially to >450%. There was no price-changing news for Chico’s (CHS), OneMain Holdings (OMF), or Chemours (CC) last week.

Exhibit 2: Significant Contributors to Performance, 8/5/22 – 8/12/22

Name Type Return
Viatris Inc Equity 14.3%
Jackson Financial Inc Equity 19.5%
Chico’s FAS, Inc. Equity 11.3%
OneMain Holdings Inc Equity 9.3%
The Chemours Co Equity 7.0%

Source: Miller Value Partners

One equity and one bond comprised last week’s top detractors. There was no price-changing news for Organon (OGN) or Lumen Technologies Inc 7.6 9/39 last week.

Exhibit 3: Significant Detractors from Performance, 8/5/22 – 8/12/22

Name Type Return
Organon & Co. Equity -0.7%
Lumen Technologies Inc 7.6 9/39 Bond -0.1%

Source: Miller Value Partners


Check out the weekly update for Opportunity Equity. Click to Read.


1The performance figures reflect the results of a representative account net of management fees 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. There is no guarantee that market trends discussed herein will continue. 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. Portfolio composition is shown as of a point in time and is subject to change without notice. 

©2022 Miller Value Partners, LLC

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